Launching a fintech in Australia is harder than ever before, claims entrepreneur Mark Bouris.
Australian entrepreneurial legend Mark Bouris has said there is no way he could have started Yellow Brick Road if he were to try again today, claiming the alternative mortgage market has changed too much since the 2008 financial crisis.
The government bailouts, Bouris claimed, radically lowered the cost of capital for banks, as it made clear to the global capital market that these nominally private institutions were in fact guaranteed by the state.
Making matters worse, in bailing out the banks the government also raised the costs of capital for everyone else, as the financial crisis sharpened suspicions of alternative sources of lending in property.
“If you’re a non-bank lender you’re looking at a big premium on the borrowing side meaning the banks can under-price you. Yellow Brick Road, the company I started, could not do what it did today,” Bouris said at the AltFi conference in Sydney on Monday.
He said that the only business model that was truly working for fintech startups in the Australian property market was brokerage fintechs. But even here, he said there were issues with scaling.
Lenders and aggregators, including his own aggregation service, were popular but revenues were not large enough to drive significant profits.
“The only model that works [in property] at the moment is being a broker. Aggregators are struggling and will see consolidation. Platform fees are not enough to generate a profit. They sometimes get pass throughs but not often.”
While property fintech had problems, it was unlikely that the entrance of Amazon or Facebook would be one. He cited historical examples, such as when General Electric tried to be a bank but gave up when a market downturn hit.