Industry Trends in Australia
The financial technology industry, Fintech, is a rapidly evolving part of the economy. It is characterized by revolutionized financial services and numerous providers of the services. It aligns finance and technology to bring innovations in delivery of financial services. Peer-to-peer lending is the most used financial technology in Australia. This model allows lenders or investors to connect with potential borrowers online facing out the need for financial institutions. It is a disrupting service in the lending sector and has taken a significant market share from the traditional financial institutions.
In a report by KPMG, the committee of Sydney was looking for a way out to conquer the rapidly growing industry. This is because in Sydney, Fintech is a key economic driver of national productivity. The research by KPMG shows that Silicon Valley, New York and London are among centers that have a well established Fintech industry. Sydney is the leader in Fintech in Australia. In the Australia, the industry is in its nascent stage with most companies being one or two person start-ups. However, the activity has picked up with time. The report recommended a few issues for the industry to continue growing. The major recommendation was the participation of the state government in collaborations with the private sector partners and the committee of Sydney to ensure a developed Fintech vision and strategy.
A media report by Ibis World provides that peer-to-peer lending in Australia is in its infancy stage. In 2014, loans issued were approximately 500 million US dollars by Morgan Stanley. The UK and the US have loans issued totaling $ 2.3 billion and $12 billion respectively. In Australia, major investors like Westpac, James Packer, Rupert Murdoch and Kerry Stokes are interested in this Fintech service. All these investors are members of SocietyOne a peer-to-peer lender in Australia. In Australia, most peer-to-peer lending is only available to the big investors, that is, individuals with at least $2.5 million or at least $250,000 annual gross income.
The rapid growth in the industry has made most peer-to-peer lenders to look into opening offerings for retail investors. The industry has a few local start-ups and established peer-to-peer lenders from foreign markets who have capitalized on this gap in the market.
Industry Trends in the UK
The UK has one of the most developed Fintech industries with London being the most significant city in the industry. The UK government is continually participating in the industry to foster development in the sector. Private funding has grown strongly in London and approximately 44,000 people as at 2014 were working in the industry. The UK is well situated location for growth in financial technology. It has a traditional Fintech sector and an emergent Fintech sector. The traditional one has large technology firms that support the financial service sector. The emergent has small but innovative companies that use the newest technology to offer financial services to their customers directly. The emergent sector is often very disrupting in the UK.
The continued high growth in UK is due to a number of factors. They include;
Availability of large and sophisticated technological customer base
London being the world’s leading centre for financial services
Availability of business capital
Participating government and a supportive regulatory approach
Excellent financial services infrastructure
London is a global trading hub
Payments, financial data and analytics, financial software and platforms are among the micro sectors of the Fintech industry in the UK. The payments micro sector is the largest. It is based on the innovation level and scale split between infrastructure and online segments. Infrastructure is well established with large players based on business models that rely on economies of scale. Online segment is sectioned and has very many new entrants. Financial data and analytics is another micro sector supported by the business models that rely on economies of scale and ability to collect a wide range of financial data on customers.
The financial software sector is dominated by large international tech companies with headquarters in the UK. They offer many solutions to financial institutions like risk management, payments software, accounting software and core banking. Platforms sector is dynamic and varies depending on the market segment. These segments include peer-to-peer platforms, trading platforms, personal wealth platforms and aggregators.
Industry Trends in the US
Based on an info graphic by Call Levels, Fintech is a fast growing industry with a enormous growth in investment. The US has doubled its investment from $4.05 billion in 2013 to $31.6 billion in 2015. The largest areas of investments are payment processing and lending solutions. Emerging technology like peer to peer lending has increased with cloud techs adding speed and security to the financial networks.
In the US according to IBIS World, peer to peer lending has rapidly grown in the past five years. It is expected that the industry will grow at an annual rate of 156.8% to reach a $1.2 billion. Consumers and small businesses have led to this growth in the US. Peer-to-peer lending enables these customers to obtain small loans that they cannot qualify for in financial institutions due to the stringent policies. In the US, peer-to-peer lenders are required to register as securities with SEC due to the high uncertainty that characterizes the market. More regulations are expected if these lenders continue to increase relative to consumer lending.
Industry Trends in Singapore
Asia is among the global hubs of financial services with Singapore and Hong Kong being the most significant financial service sectors. Singapore is aggressively fostering Fintech development. The Singapore government invests heavily in the sector to ensure innovation. Direct investment and tax incentives are among the strategies used to ensure this innovation. Singapore is strategically located with a good cultural and legal environment and a developed financial service sector. The country has ICT potential that provides a fertile eco-system for Fintech. The skills and business environment are major factors that have led to the strategic growth advantage of the Fintech industry in Singapore.
Extent of Influence by Macroeconomic Conditions in the Peer-to-Peer Sector
All these countries have economic factors that have led to the rapid growth of the industry. The countries are strategically positioned enabling them to develop the Fintech sector in their economy. Fintech industry is a technological industry that is backed up by the great innovations in technology as well as the rapid change in technology. The government in these countries is a major player in the industry. The government provides a macroeconomic environment that encourages innovation in the industries. The continued government support is the most influencing factor in the rapid growth in these industries. The industry is expected to continually grow rapidly.
ICT potential provides a fertile eco-system for peer-to-peer services. The skills and business environment are major factors that have led to the strategic growth advantage of the Fintech industry. Peer-to-peer lending enables these customers to obtain small loans that they cannot qualify for in financial institutions due to the stringent policies. Presence of large technology firms that support the financial service sector and emergent of small but innovative companies that use the newest technology to offer financial services to their customers directly led to growth in the peer-to-peer sector.
Industry Trends in Australia