2017 news ccafreport asiapacific 883x432 1

Cultivating growth

20 September 2017

The article at a glance

Online alternative finance in the Asia-Pacific region grew 136 per cent last year to $245.3 billion, says the second Asia Pacific Alternative …

Online alternative finance in the Asia-Pacific region grew 136 per cent last year to $245.3 billion, says the second Asia Pacific Alternative Finance Industry Report.

The online alternative finance market in the Asia-Pacific region grew 136 per cent last year to $245.3 billion, led by strong growth in China, the 2nd Asia Pacific Alternative Finance Industry Report reported today (20 September).

The report, entitled Cultivating Growth, was produced by the Cambridge Centre for Alternative Finance at Cambridge Judge Business School, University of Cambridge, the Australian Centre for Financial Studies at the University of Monash Business School in Australia and Tsinghua University in China. Financial support was provided by KPMG Australia, CME Group Foundation and HNA Capital.

China was by far the region’s largest alternative finance market in 2016, at $243.3 billion (up from $101.7 billion in 2015), including $136.5 billion in marketplace/peer-to-peer consumer lending and $57.8 billion in marketplace/peer-to-peer business lending.

After China, Australia emerged as the second largest market in the Asia Pacific with $610 million – a sizable increase on the $398 million from 2015. Combined with New Zealand, which totalled $223 million in 2016, Oceania was the largest regional market in the Asia Pacific outside of China. The Australian market largely consisted of balance sheet business lending ($217 million), peer-to-peer consumer lending ($158 million) and invoice financing ($130 million), while peer-to-peer consumer lending led the way in New Zealand with $163 million in 2016.

Other key markets in the Asia Pacific region in 2016 were Japan at $398 million, South Korea at $376 million, Singapore at $164 million, and India at $124 million.

The alternative finance sector in the Asia-Pacific totalled $102.8 billion in 2015, the first year for the survey, rising to $245.3 billion in 2016.

“The online alternative finance platforms that have emerged across the Asia Pacific since around 2013 have changed the way people, businesses and institutions can access, raise and invest money,” the report says, noting that there was continued growth across most alternative finance platforms across the region last year.

The report is based on data collected from 628 platforms across the Asia-Pacific region, including 463 from China and 165 platforms from the wider region. The data covers around 20 parameters which have been standardised by the Cambridge Centre for Alternative Finance since 2013.

Among the report’s other findings:

  • China continues to see “distinctively low levels” of institutional participation in alternative finance compared to other markets such as the US and UK, with only five per cent of peer-to-peer business lending coming from institutions in 2016. Online lending models in China are led by individual retail lenders.
  • In the Asia Pacific outside of China, about $1.5 billion was raised by businesses through alternative finance channels, up 72 per cent from the previous year, with an estimated 43,000 business entities utilising alternative channels of business finance.
  • In China, 72 per cent of peer-to-peer consumer lending platforms see cyber-attacks as the biggest threat to the industry, while more than 50 per cent across all platforms in China see current and proposed regulatory norms to be adequate.
  • Outside of China, 69 per cent of platforms in Japan see existing regulation as inadequate or too relaxed, while in Singapore, Australia, New Zealand and Malaysia around two thirds of platforms see current regulations as adequate.

“Reviewing these market trends, the alternative finance industry is fast taking root across the Asia Pacific region although with quite divergent and distinct characteristics,” the report says. “The question now going forward is what type of growth must now be cultivated across the Asia Pacific region over the coming years to realise the benefits offered by the alternative finance industry.”

Bryan Zhang
Bryan Zhang

Bryan Zhang, Co-Founder and Interim Executive Director of the Cambridge Centre for Alternative Finance, said: “As the online alternative finance market continues to grow, it is perhaps more imperative than ever to explore what kind of growth is desired and needs to be achieved…. To have a long-term, sustainable and inclusive growth, online alternative finance industry needs to adhere to best practices and cultivate trust, keep innovating in products and services and provide returns to investors.”

Ian Pollari, Global Co-Leader, KPMG FinTech Practice, added: “The innovative digitisation of financial services by Alt-Fi platforms is lowering transaction costs, enhancing convenience for customers, and increasing access to credit and investments for underserved segments. Australia has an opportunity to lead the way, but we must proceed mindfully. Regulation can have a profound impact on the development of the sector. For example, the uncertain regulatory environment for equity crowdfunding, ahead of legislation taking affect this year, no doubt contributed to a notable drop in activity in 2016. This underscores the vulnerabilities that might impede future growth which need to be identified, understood and prudently managed for the long-term viability of Australia’s alternative finance industry,” he said.

Kieran Garvey
Kieran Garvey

Kieran Garvey, Head of Regulation & Policy at the Cambridge Centre for Alternative Finance said: “The Asia Pacific region was the world’s largest online alternative finance market in 2016 as in 2015. This report however demonstrates vast differences between countries in this region. China leads the alternative finance industry in terms of total market activity and this has no doubt led to increased financial inclusion amongst businesses and consumers there. Perhaps one of the most interesting developments over the coming years will be the extent that China’s leading platforms can export their alternative finance models to the wider Asia Pacific region – a trend that is really yet to emerge.”