By David Tuckwell on Wednesday 18 April 2018
Australia has a great regulatory environment and fintech lending is growing quickly. But consolidation is around the corner, OnDeck said.
Australia has all the makings of a fintech lending oasis, thanks to proactive regulation and a clear gap in the market, the boss of OnDeck, one the world’s largest fintech lenders, has said.
Speaking at AltFi’s conference in Sydney on Monday, Noah Breslow indicated that Australia was ahead of its global peers, particularly in its cooperative approach with regulators. He cited the formation of the industry body FinTech Australia, the lobby group joint-funded by the Australian government and industry, as a leading example.
“The Australian fintech industry is very organised compared with other countries. The industry has been very proactive in working with the regulators. This approach means that the government stays away and is happier to let the industry do its own thing,” Mr Breslow said.
With regulatory support, Australian SME lending is growing, Mr Breslow said. With Australia’s SME online lending market growing at a CAGR of 151 per cent the past year alone.
Despite the growth, Mr Breslow warned that consolidation was around the corner. He said that there were too many players in Australian fintech lending (20 per cent of Australian startups are fintechs) and this number would drop off.
“Expect consolidation – in the US six have shut down the past year, mostly because they haven’t achieved scale,” he said.
“This is a business that advantages the scale player. Those that are failing to reach that [in the US] are getting acquired or shut down.”
OnDeck hit profitability last year Mr Breslow said, joining an exclusive global club of profitable fintech lenders. He suggested part of the reason they had managed to hit profitability was the advantages of lending on your own balance sheet.
“When you hold loans on balance sheet you capture more profit than when you sell them off through securitisation facilities. Balance sheet lenders can operate at higher profit margins,” he said.
He added that OnDeck’s profitability was aided by a lower cost of capital, which owed partly to a hugely experienced team but partly also to luck.
“Our loans are shorter term, but we had a very experienced team with more than 10 years of experience,” he said.
“Sometimes the wind is in your face and other times it is in your back. Were had the good fortune of having the wind in our face.”