Alternative finance market in APAC growing rapidly


Australia’s alternative finance market is on the rise, following a trend of robust growth in peer-to-peer lending and crowdfunding across Asia Pacific in 2015.

Australia’s alternative finance (Alt-Fi) market is on the rise, following a trend of robust growth in peer-to-peer lending and crowdfunding across Asia Pacific in 2015.

The findings come from a new study by KPMG, titled Harnessing Potential, Asia Pacific Alternative Finance Benchmarking Report, which examined over 500 Alt-Fi companies across the region.

Alternative finance – which includes both commercial and social enterprise in the form of marketplace and peer-to-peer business lending, equity-based crowdfunding and real estate equity and lending models – is often understood as financial services provided independent of traditional banking institutions.

The report found Australia to be the third largest market for these services in Asia Pacific, recording a growth of 320 per cent last year with over US$348 million in reported Alt-Fi funding.

KPMG’s fintech practice global co-lead, Ian Pollari, said that despite being a “relatively new concept”, Alt-Fi had gained significant traction globally since 2013.

“In Asia, [it] has already become a multi-billion dollar market,” Pollari said.

“Activity in China dwarfs much of the region, but Australia is punching above its weight, creating niche markets and capitalising on the sophistication and financial muscle of its established financial services sector.”

Source: Asia Pacific Alternative Finance Benchmarking Report, KPMG, March, 2016

KPMG’s findings noted the Alt-Fi market grew to a total of $102.8 billion in Asia Pacific, which was led by a “four-fold” increase in China to a total of $101.7 billion.

China’s rapid rise in Alt-Fi consumption is consistent with the growth trajectory it has taken over the last few years, with China’s Alt-Fi market expanding from a “relatively low base” of $5.56 billion in 2013 to $24.30 billion in 2014, the report states.

The study attributes this rapid expansion of Alt-Fi in China to the country’s global leadership in internet user base and smartphone connections, as well as the fact that Alt-Fi has been “mostly unrestricted and unchecked” until recent guidelines by regulators.

However, the study showed that the institutional funding of online alternative finance is notably higher in the wider Asia Pacific region outside of China, with 63 per cent for peer-to-peer lending outside China and 10 per cent in China.

Banks will increasingly work with Alt-Fi providers

Pollari said a key trend that we can now expect to see is a greater level of collaboration between incumbent financial organisations and alternative finance platforms in Asia Pacific.

“Looking ahead, 2016 is predicted to be the year where ‘alternative’ financial options finally join the ranks of the mainstream,” he said.

“We foresee continued growth in awareness amongst Asian consumers and businesses of the viable funding options alternative finance platforms can provide developing markets.”

The report also advocates for the need to consider the regulatory frameworks concerning alternative finance across the region, particularly as new and proposed regulations were presently up for discussion in a variety of countries including Australia, Singapore, South Korea and China.

“There is an urgent policy need to study the Asia-Pacific alternative finance market, given that it is largely unregulated with many countries currently developing their respective regulatory frameworks,” the report states.

“Given the rapid development of the sector, it is crucial that policies and regulation are informed by up-to-date and rigorous studies to facilitate data-driven, evidence-based approaches in order to best harness the sector’s potential.”