What's Next for Alternative Lending for Australian SME's

Rob Young (OnDeck)

Rob gave the opening keynote explaining fintech’s success and how different countries compared.

• China is getting tighter regulation. The US has the largest market by far, but it is contracting.

• He thought most highly of the UK, which has grown significantly, owing to good regulation. The EU by contrast was lagging behind in terms of origination volumes. 

• “Why is the growth in online lending happening? There are reasons on the yield side, but it’s mostly on the demand side. That is, customers really enjoy looking at alternative sources besides the bank.”

Click here to watch Rob's Keynote

Marketplace Lending - a maturing industry and asset class 

Ron Suber (Prosper)

Ron argued that the sharing economy is transforming into an access economy — “think about Uber and Airbnb and how they changed things. We’re creating this access and access economy to things we could never get to on our own.”

• He compared the transformation occurring in online lending to what occurred in online trading decades before. “In 1985 there was no industry, then global growth, then volatility then M&A, then establishment. What we’re doing is the same thing. It follows the same path.”

• He said that the days of getting easy money from venture capital aren’t over but they’re changing in fundamental ways. 

Click here to watch Ron's Keynote

Trends in Australian credit quality

Simon Bligh (Dun & Bradstreet)

Simon’s presentation focussed on credit trends and for him, Australia was not in a good place.

• “What are we seeing in collections frankly its not good: the volume of customers is increasing quite significantly. But the line that is more concerning to me here is the average value, you’ll see that that is on a distinct upward trend.” 

• The rate of change is at an historical high and we’re seeing sharp deterioration in the ability to pay from the bottom three deciles of the population. “Its an early signal of distress.” 

• The change on the SME side was not promising either as days past due was increasing. 

• The default trends were also geographically concentrated in the south-eastern states and territories of Australia (VIC, NSW, SA, ACT).

Click here to watch Simon's keynote

The Evolution of Advice - Advisers, Superannuation, Technology and Consumers

Paul Clitheroe (Australian Government of Financial Literacy Board)

Paul returned this year, and was in good humour. He offered the view that the complexity of fintech meant that it was out of reach for mum and dad investors.

• He emphasised that the Australian population is among the most financially educated in the world, but because the financial services industry was always changing it was hard to keep up. 

• He also stressed that while some technologies may change the fundamentals of risk and return will not.

Click here to Paul's Keynote

A regulatory approach to enable retail P2P lending

Daniel Foggo (RateSetter Australia), John Price (ASIC Commissioner), James Ayers (Australian Financial Review)

James Ayers moderated a talk between the regulator and the regulated, with a view to regulation.

• The discussion turned on how Australia had no specific legislation to deal with fintech companies or alternative finance as such and so it fell under Managed Investment Scheme regulation.

• John indicated that ASIC would issue more industry waivers and spoke about how Australia was taking a world-leading role on that front.

• Daniel talked about how Australia and Britain were both getting regulatory guidance from one another and said that it was a great thing.

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The Future of Australian Fintech and ANZ's role

Shayne Elliott (ANZ), Paul Allen (Bloomberg)

In what was perhaps the high point of the conference, Shayne laid out his thoughts on how established players like ANZ were here to stay and not overly troubled by fintech.

• He made the point that ANZ thought in much larger numbers than fintechs, where fintechs thought in millions of dollars ANZ thought in billions.

• Striking a diplomatic tone, he said that both fintechs and banks have things that each other want: banks have customers and fintechs have new ideas. 

• In conclusion he said that ANZ was starting to share customer data and made comment on the lack of gender diversity in fintech. 

Click here to watch Shayne's Interview

Is Blockchain overhyped?

Chami Akmeemana (ConsenSys), Loretta Joseph (Sydney Stock Exchange), John Pellew (Othera), Tal Morgenstern (Oliver Wyman)

The panel, moderated by Tal Morgenstern, discussed the growth of Blockchain in Australia

• Loretta Joseph made the case that advocates needed to be more proactive in engaging regulators as there was only one Australian regulator that recognised the Blockchain. 

• For John, there was an important element of trust. If there is no trust in the system then it wouldn’t develop or grow. 

• Chami Akmeemana took a stronger line, arguing that “blockchain will work for the consumer, inherently” — as it was consumer driven. “The risk is not adapting to blockchain: the system has been around for a while and we’ve had no breeches of privacy and security.”

Click here to watch the panel

What is the Future of Open Data?

Ben Styles (Xero), Amy Ciolek (Ashurst), Jack Quigley (CrowdfundUP), David Grafton, Dr. Adam Flesch (Oliver Wyman)

Amy Ciolek lead a wide-ranging discussion on data sharing and privacy, on which opinions in the room varied greatly.

• David Grafton thought banks, which strongly oppose forced data sharing, forget how open data can benefit them as well. He believed that a move towards shared credit data was overdue.

• Adam said that breaking banks monopoly control over data would have hugely beneficial implications all down the value chain.

• Ben argued there was a misunderstanding about what data sharing was, as Xero has been doing data sharing for a decade.

• Jack Quigley argued that open data can allow incumbents to be chipped away and increase competition, for the better of Australian consumers. 

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Trends in International Lending

Neil Roberts (Harmoney), Richard Williamson (CreditEase), Alex Benjamin (Lendful), Mattias Karnell (Maneo Market), Julie McKay (Veda)

This internationally diverse panel, moderated by Julie McKay, discussed how regulations and trends in different countries are driving the growth of fintech.

• In Japan Mattias discussed how banks refuse to lend to property developers created room for nascent fintechs to move in.

• Neil explained his plans to grow from New Zealand into Australia, given the very different regulation in each country.

• Richard gives insight into China and how banks work very differently.

• On Canada, Alex spoke about how Canadian banks have been too slow to move, giving small agile fintechs an edge. 

Click here to watch the panel

Lessons in disruption: Innovation in investing

Graham Tuckwell (ETF Securities), David Stevenson (AltFi)

The Chairman of ETF Securities gave his views on fintech’s potential and how it can learn from the experience of ETFs. 

• “I think that fintech is where ETFs were about 10 years ago.”

• Five years ago, hotels were only worried about competition from each other then along came AirBnB. Hotels were wrong to think they were invincible, so are banks.

• “You need to get yourself defined as an asset class. its partly through the media, through the regulator and through the exchanges.”

• “In the early years of ETFs it was just the industry talking to itself. The big push we drove was to convince all the influencers instead of marketing to customers market to the influencers. It’s too expensive and hard going to customers go to the intermediaries.”

Click here to watch Graham's Interview

How can banks emulate "fail fast and pivot" approach of a start-up?

Rebecca Licciardi (NAB), Michael Bennet (The Australian), Kareem Al-Bassam (Tyro), Macgregor Duncan (Westpac)

This panel debated what banks can learn from startups and what challenges they face in a fast moving industry, facilitated by Michael Bennet. 

• Rebecca said big banks are usually slow moving, but NAB created a fintech very quickly. She said that the industry was moving quicker than ever, “I’ve been in the industry two decades and I’ve seen most innovation in the past two years.”

• Kareem said that big banks were too big and Tryo was trying not to get sucked into the bureaucracy and silos of big banking. “We’re trying not to fall in the hole. We don’t want a situation where things get political and territorial.”

• Macgregor said that all Australian banks are thinking about fintech and how they fit in. “Its critical that we develop our responsiveness to trends in the marketplace. On both sides of the equation there is a lot of learning to be done in order to get better.”

Click here to watch the panel

What is Responsible Small Business Lending?

Leo Tyndall (Marketlend) Boyd Pederson (Bigstone) Jens Woloszczak (Spotcap) Aris Allegos (Moula) Kieren Parker (Addisons Lawyers)

• Facilitated by Kieren Parker, this panel examined lending ethics and wondered out loud who fintech lenders were responsible to.

• For Leo, education was more than key “we have to make it clear to borrowers how things work.” And made clear there was an ethical case in rejecting loan requests. 

• Aris emphasised the role of transparency, so it was clear to borrowers what they were getting into. This involved telling borrowers that if they’re riskier the loan is going to cost more. 

• Boyd claimed that the structure of international finance failed SMEs. “SMEs create 50% of jobs. If you’re a young person who doesn’t have real estate collateral you can’t get a loan.”

• Jens said that in direct lending companies are responsible not to overcharge or provide too much capital that borrowers can’t serve at the end. “You have to explain to them that we can’t provide too much as we’re providing 12-18 month loans, not 10 years.”

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Recent Valuation Trends & Positioning for VC and Institutional Capital

David Goldin (Capify), Jon Barlow (Edgemont Investments), James Cameron (Airtree Ventures), Indraveer Srivastava (MW Eaglewood)

This panel debated what banks can learn from startups and what challenges they face in a fast moving industry, facilitated by Michael Bennet. 

This panel centred around profitability and how new platforms are struggling to achieve this because of customer acquisition costs. 

• David warned that a lot of platforms were struggling and going under before ever achieving profitability. It then becomes hard to attract investors if you don’t have profits. 

• Jon, who sits on seven fintech boards, warned that there was a risk with any tech startup that if incumbents wake up to the threat posed new comers.

• James emphasised that rely on repeat customers what not so much the issue, what mattered was covering customer acquisition costs. 

• Indraveer issued a stark warning that many platforms will never become profitable, major platforms are not profitable yet, that doesn’t mean you’ll never be profitable - but the dreaming days are over. 

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New Generation of Disruptors

Ritchie Cotton (Valiant), David Brennan (Kikka), Stephen Dash (Credible), Weimin Miao (Credit Research Initiative), Stuart Stoyan (MoneyPlace)

This young panel interviewed budding entrepreneurs, looking at where they saw the industry going. 

• David emphasised the importance of versatility and offering multiple products. “We see a huge amount of crossover between customers, if one customer gets declined they might be able to get a personal loan from our other product”.

• Ritchie emphasised that having a unique identity was important and that tech could be used to find a niche. 

• Stuart argued that it was not all set and done and the market hadn’t consolidated yet, although moves were being made in that direction. 

• Stephen said that targeting millennial was very experience-driven and that what mattered above all was Uber-like simplicity. 

• Wiemen said that using technology to assess credit risk was important, not only for assessing actual risk but also for building investor confidence. 

Click here to watch the panel

Is our business banking system really dysfunctional and how do we fix it?

Dr John Hewson (ANU), Dermot Crean (Invoice X), Kevin Nixon (Deloitte)

This panel debated what banks can learn from startups and what challenges they face in a fast moving industry, facilitated by Michael Bennet. 

This panel of industry veterans examined just how broken the Australian banking system was compared to other countries, and made productive suggestions as to how it could be bettered.

• For former Liberal Party leader John Hewson, there’s a reasonable possibility that the big banks will be broken up. “It’s very difficult to do but its a political solution. Free marketers would not necessarily oppose that as they have to be seen to do something.”

• Dermot Crean said that it wasn’t just the banks behaving badly, but that there were also real problems with the Basel Accords. He wondered whether an act of parliament was necessary to fix the banks or is it enough to codify what we’ve already got?

• Kevin Nixon said that big banks won’t do data-based SME loans like fintechs simply because such loans are riskier and making riskier loans jeopardised their capital - risk ratios. 

Click here to watch the panel

Where to from Here?

Ron Suber (Prosper), Ian Pollari (KPMG Australia), Greg Symons (SocietyOne), Cameron Poolman (OnDeck)

The final panel examined where fintechs could go from here.

• Ron argued that in Australia real estate “is the most interesting asset class i’ve seen and there are ways to solve for it.”

• Greg Symons coming from a consumer lending standpoint said that 2016 was fantastic a pivot year for volume. Moving forward biggest challenge is access to data and improving the customer experience. 

• Cameron Poolmon noted that the optimism was more tempered this year than last and said that the focus had to be on consumers. He said that going forward consolidation was inevitable. 

Click here to watch the panel