Fintech is too small and young to have industry veterans. But insofar as there can be said to be one its Jon Barlow.
Founder and former CEO of Eaglewood Capital, Mr Barlow sits on a massive seven fintech boards across three continents. In Australia, he lends his knowledge to Marketlend, the Sydney-based P2P on whose board he sits.
“The Australian online lending industry reminds me very much of the U.S. market 4-5 years ago, with relatively low awareness amongst the general populace,” he says.
“I think the primary difference [between] Australia [and the] U.S. 4-5 years ago is that the incumbent banks at least seem aware of the fintech industry and appear to be thinking about how to handle it.”
Hailing from the US, Mr Barlow has been a fintech mover and shaker from the beginning. Since taking up the position with Marketlend he has been quiet observer of the Australian scene, which excites him – precisely because it lags behind the US.
“I think we will see very high growth in Australian online lending sector going forward given the country’s combination of high mobile banking usage and high credit card penetration, attractive investment yields that are among the highest in the developed world, and a legal system and investment structures that are highly familiar to the large institutional credit investors.
“Australian online lenders should also attract significant capital from Asian investors given their proximity and deep trade relations in the region.”
The obvious solution for Australian investors looking to make safer online loans was to focus on property. Property investment in Australia has been reliable for decades, having averaged 5 per cent returns since the 1990s. Indeed, property was one of the themes of the AltFi Australasia Conference this week.
But Mr Barlow remains a decided skeptic.
“Personally, I am nervous about lending into the property sector with prices as high as they are right now.
“I am taking a more conservative approach and using the Marketlend platform to invest in loans that have credit insurance provided by a major financial institution and secured by small businesses’ invoices and inventory.
“I believe this a very unique value proposition, not just in Australia but in online lending around the world.”
The Australian banking sector is much more concentrated than the US – with four major banks taking around 90 per cent market share. There were also no bank bailouts in Australia during the GFC.
Despite these differences, Mr Barlow sees Australian banks following a similar pattern to the US in dealing with online lenders in the near future.
“They will start very conservatively by providing senior debt to other online lending investors and balance sheet platforms.
“They will then start buying their loans and forming partnerships of various types with them, including licensing of their credit models
“Then they will purchase equity stakes as a means of deepening these partnerships and gaining additional information and insight into their businesses
“Eventually, a few banks will form their own online lending platforms funded by their access to cheap deposits. Bank acquisitions of online lenders are also an eventual possibility.”
31 May 2023
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