Fintech Australia partners with small business ombudsman to lead charge for transparency among fintech lenders
As fintech lenders come to dominate the lending landscape for small business, the industry is taking steps to increase transparency.
Industry body FinTech Australia has partnered with the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) and theBankDoctor.org to release a report, Fintech lending to small and medium sized enterprises: improving transparency and disclosure, analysing the approaches to disclosure across the industry and making recommendations on best practice moving forward.
Highlighting the work done by fintech lenders in providing a genuine alternative finance solution for small businesses, ombudsman Kate Carnell commended the fintech industry for “embracing” the need to improve transparency and disclosure.
“This report informs both the fintech industry and small business borrowers of the steps being implemented to allow an easy comparison of products and to ensure loan agreement contracts comply with the unfair contract terms legislation,” she said.
Danielle Szetho, CEO of FinTech Australia, added, “Through the use of technology platforms which analyse rich, real-time business financial data and deliver easy-to-use and fast application processes, fintech business lenders are making a real difference to small businesses.
“However, like many financial services products, lending contracts are complex and have the potential to be complicated and confusing.”
The report identified six key pillars on which to focus industry self-regulation and action: development of a glossary of common lending terms for the industry; development of standard comparative metrics and tools used by the industry; and development of an industry code of conduct or charter.
The report also identified a need for industry support and action to comply with Unfair Contract Terms legislation; industry support of internal and external dispute resolution services; and industry advocacy and cooperation with governments to develop policy measures to support and promote.
Neil Slonim of theBankDoctor.org highlighted the need for such measures in saying small business owners, often time poor and “financially unsophisticated”, find it difficult to make fully informed decisions when borrowing from fintech lenders.
“We need a level playing field for both borrowers and lenders so business owners are able to make fully informed decisions and lenders can compete on an equal footing,” he said.
“Put simply, borrowers should be able to answer three simple questions: Is this the right product for my needs? Do I know exactly what it is going to cost? Do I know that I can’t get a better deal elsewhere?”
With this in mind, among the items for action proposed by the report is fintech lenders to agree to the contents of an easy-to-understand contract summary page by this June, while the ASBFEO and theBankDoctor.org will collaborate on the production of a guide to help SMB owners better understand the ins and outs of borrowing from a fintech lender.
The report comes as the fintech lending industry continues to kick goals; the 2017 Fintech Census from Fintech Australia and EY Sweeney found online lenders make up 23 percent of the local fintech landscape.
After raising $25 million in funding last February and a $20 million debt facility in July, local online lender Prospa in December joined the lending panel of investment management company Yellow Brick Road, which is looking to extend its offering for small business customers.
The Australian division of European-based online lender Spotcap in early 2017 announced a partnership with New Zealand’s listed Heartland Bank, which provided the fintech with a A$20 million funding facility to help grow Spotcap across Australia and expand into New Zealand.
Meanwhile, consumer lending fintech MoneyMe in November announced it had raised a $120 million asset-backed securitisation facility.
MoneyMe has loaned $150 million to 70,000 borrowers since its launch in December 2013, with $80 million loaned in the last 12 months alone as it upped its maximum loan size from $5,000 to $15,000.
Image: Danielle Szetho. Source: Supplied.