By Roger Baird on Sunday 7 April 2019
The peer-to-peer lender’s boss, Mark Jones, says global headwinds and house price declines have eased consumer lending.
Mark Jones is chief executive of Australia’s largest peer-to-peer lender SocietyOne with more than A$600m of lending and a loan book approaching $300m since it was launched in 2012. Its closest rival RateSetter says it has arranged A$500m in loans.
The firm has raised more than A$60m over that time, with backers including three of the country’s most famous business dynasties - the Murdoch, Packer and Stokes families. These trusts have also provided the fintech with high-profile TV advertising support during such events as the 2016 Rio Olympics and 2017 Australian rules football grand final.
The combined lending of Australia’s peer-to-peer lenders is just over A$1bn, or around one per cent of the country’s A$100bn consumer finance market. In the admittedly older UK market, peer-to-peer lenders have around 15 per cent of the small business market. A 2015 Morgan Stanley report said Australian peer-to-peer lenders would hold 6 per cent of the loans market by 2020. Why has peer-to-peer lending failed to become disruptive in Australia?
We are miles ahead of our nearest competitor in Australia. However, there are a number of challenges specific to the Australian market that we all face.
Incumbency and lazy customers has been more difficult to overcome than anticipated. For example, we have seen similar issues with bank account portability.
Also, Australia has been slow to roll out the pillars that fintechs need to be fully successful, where other jurisdictions have been able to leverage these pillars to improve the customer experience, hence why it is taking time in Australia.
Comprehensive credit reporting is slowly building. Mortgage data is only in the process of being included. Also, open data has been delayed to 2020. After 29 years of growth, but with global headwinds and house price declines being raised every day, consumers are generally more cautious with their finances
Lastly, we have heard many positive messages of support for fintech from our politicians, however actions are not always supportive, such as the recent reduction in the research and develop grants budget.
Does SocietyOne still plan to capture a 2 to 3 per cent share of the consumer finance market in three years?
Yes. We are growing strongly and are well positioned to continue this growth momentum over the next three years. A target of 2-3 per cent is entirely possible and our systems and processes are being built with that objective.
With the failure to float of fintech lender Prospa and consumer lender Latitude Financial, are investors wary of challenger financial start-ups?
According to the latest Venture Pulse report from KPMG, venture capital investment in local Australian start-ups reached A$1.25bn in 2018, a record high up 36 per cent on 2017 when local start-ups raised A$920m.
Asia-based start-ups received over A$132bn 2018, while global overall investment reached A$355bn in 2018, up from A$244bn in 2017.
Australia also is starting to see a steady flow of major funding rounds over US$10m for the first time. We continue to see strong investor interest in fintechs.
Reportedly, SocietyOne had plans to float, which were set aside. Does SocietyOne have any plans to float over the coming two to three years?
SocietyOne is growing strongly and our shareholders continue to provide strong support. As an example, NewsCorp Australia and Seven West Media have just contributed significant media support. For the time being, our mandate is to maximise the opportunity in front of us.