As the number of fintech firms continues to grow, companies will have to reduce costs and become profitable or be forced to consolidate.
This is the view of Cameron Poolman, chief executive of small business lender OnDeck. Speaking to The Australian
a year after the company first launched, he said that fintechs were inherently expensive to run.
“The economics are different [to banks]. You’ve got a higher cost per acquisition, or you’ve got origination fees from a broker or partner, you’ve got the cost of capital, loss rates and administration costs,” he told the paper.
“That’s why you actually need to build scale to make these things profitable.”
A lack of awareness of the various fintech firms on the market means that costs such as employing staff, complying with regulation and advertising could significantly eat into a business’ margins.
Due to these “really high” costs, Poolman expected that the overall fintech market would be whittled down to “two or three” players eventually.
While he admitted that low awareness was the biggest challenge, he said that one in four businesses now know about fintechs – a figure that is up from the 16% recorded earlier this year.
While OnDeck wouldn’t reveal the firm’s current loan book or loss rates, Poolman told The Australian
that performance was in line with the company’s three-year budget.
In its most recent accounts filed for January to December 2015, OnDeck showed a $2.9 million loss on $463,000 worth of loans. However, the company was not lending the entire time during this period.
Listed in 2014, the company stressed to investors that it would experience an annual adjusted earnings loss of between US$35 million and US$43 million on a gross revenue of US$290 million.
Fintech could perpetuate fraud: Medcraft
Artificial intelligence could be used to hunt rogue brokers
ASIC encouraged to stimulate fintech boom