With Australia at the edge of an emerging fintech boom, more government support is needed to turn the industry into a powerhouse that benefits business and consumers, according to one legal finance expert.
In an opinion piece for The Australian
, Liam McLagan, general counsel at commercial lender Bigstone, says a lack of government backing would be a “huge missed opportunity” that could cause local fintechs to be overtaken by global players.
“Research from Frost & Sullivan predicts the Australian fintech market will add $1 billion in value by 2020. Missing out on this ride could be a massive loss for everyone involved.
“Morgan Stanley says that marketplace lending to small business (alone) in Australia will have an $11.4 billion market share by 2020 – just over three years away,” he says.
McLagan recommends that regulators and policy makers first look to fintech policies which are successful overseas. He points to ASIC’s regulatory sandbox as an example – an initiative which has also been used in the UK, Singapore, Thailand and Hong Kong.
“Another immediate solution would be requiring banks that decline any business loan application to refer that business to an alternative lender, especially a marketplace lender,” he says.
This would then encourage SME borrowers to seek out other sources of funding to grow while helping the economy as well as the fintech industry.
The introduction of a ‘comparison rate’ for SME lenders (including the annual percentage rate plus all fees and charges) would also stimulate the boom as it encourages greater transparency and allows consumers to easily compare loans.
“There are no such requirements on SME lenders, and many of the different loan offers that a small business person weighs up can be expressed in very different terms.”
Improved standards for investor advice, such as accurately assessing credit risk scores for consumers would also encourage more investment by injecting greater stability into the fintech world.
“ASIC should require a base level of sophistication for advice to investors in marketplace lenders, especially for those marketplace lenders that chase retail investors. A modern, data-based approach to risk should be reflected in licensing standards,” McLagan says.
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