“Loan size is vastly bigger than it was 12 months ago, perhaps even double,” says Moula co-founder Aris Allegos (pictured right). “This speaks to the fact that there is more awareness of fintech and we are starting to influence decision makers.”
The Melbourne-based company began in 2014, offering working capital loans to small businesses on eBay. At three years of age, Moula is one of Australia’s oldest fintech companies.
“When we entered the market there was no term ‘fintech’,” says Allegos. “There were—at a guess—two or three genuine platforms built on technology. Today there is something like 30 or so lenders.”
Moula’s platform requires SMEs to input business data, such as sales figures, performance history and credit files. The data is then run through an algorithm, and a loan approval decision is made automatically. No paperwork or personnel are involved.
At around 1 per cent a fortnight, its interest rates are competitive with credit card companies. Unlike a major bank, where SMEs can wait long periods for an approval decision that may well be a rejection, Moula’s automated process takes only 10 minutes.
But Moula’s most important attraction for SMEs, however, has been the honesty of its profit structure. The company does not embed any fees or penalties—such as originator fees or early retainer penalties. It just applies an interest rate against an outstanding balance.
“When we launched, there were probably three or four traditional unsecured lenders in market and all of them were riddled with fees and little clauses that almost trapped the SME,” Allegos says. “With that in mind we wanted to go to the other extreme.”
As well as giving it an edge over competitors, the simple fee structure, Allegos argues, is important for defending the reputation of unsecured lending.
“I doesn’t help that other companies are less scrupulous with their hidden fees. It builds mistrust. We’re trying to make clear to them that the fee structure is straightforward."
“It’s almost like we’re playing a double-edged game: raising awareness of fintech while working against predatory players. It’s a constant battle.”
Of particular concern has been payday lending. In Australia, payday lending is more regulated than in other countries, such as the UK—where companies can lend at interest rates over 1,000 per cent.
But the payday lending space is viewed negatively by the Australian public and has been targeted by regulators over the past weeks for bad conduct.
Moula has worked hard to distance itself from such practices, and its integrity, it would appear, has paid off. As trust has built, loan sizes have grown. Two years ago, its maximum loan size was around $20,000. Today it is near $250,000.
Where Moula goes from here, Allegos says, is to keep building trust and work on its IT system.
“In 2017 we’ll be focusing on two areas. One is to continue to build out some of our strategic partnerships to solidify our role within the industry’s ecosystem. The other is to keep building our IT, helping us make the lending decisions that we should be making.”