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3rd Asia Pacific Region Alternative Finance Report

Growth in China’s alternative finance market slowed in 2017 but still reached $358 billion and accounted for 99 per cent of the Asia Pacific region’s alternative finance market, says the 3rd Asia Pacific Region Alternative Finance Industry Report.

3rd Asia Pacific Region Alternative Finance Industry Report

China’s alternative finance industry accounted for 99 per cent of the overall Asia Pacific market volume in 2017, although its growth rate slowed in 2017 to 47 per cent (from 138 per cent the previous year) to total $358 billion, the 3rd Asia Pacific Region Alternative Finance Industry Report reported today (28 November).

The slower growth in the Chinese alternative finance market reflects consolidation in the industry amidst regulatory measures, said the report. The rest of the Asia Pacific region, in contrast, saw rapid growth in alternative finance in 2017, increasing 81 per cent year on year to $3.6 billion.

This report is jointly produced by the Cambridge Centre for Alternative Finance at Cambridge Judge Business School, University of Cambridge, the Academy of Internet Finance at Zhejiang University and the Asian Development Bank Institute. This report was also generously supported by KPMG Australia, Invesco and CME Group Foundation.

The report is based on data collected from 340 alternative finance platforms in 29 countries across the region, in addition to 782 platforms in China.

Outside of China, Australia was the market leader in Asia Pacific for a third year running, up 88 per cent to reach $1.15 billion, driven largely by balance sheet business lending. South Korea was close behind at $1.13 billion, up nearly 200 per cent from the previous year, driven by peer-to-peer (P2P) property lending and real estate crowdfunding.

Business funding across the Asia Pacific region (excluding China) accounted for 61 per cent of all volume, the equivalent to $2.23 billion, with debt-based models responsible for 98 per cent of this volume.

The trend toward institutionalisation of funding continued to grow across the Asia Pacific region, particularly in balance sheet models (93 per cent) followed by P2P/marketplace consumer lending (43 percent) and invoice trading (42 per cent). The Indian market took the lead in this area, with 74 per cent of its funding coming from institutional investors, followed by Australia at 65 per cent.

Regulation remains a vibrant issue across the region, and regulatory clampdowns has led to a fall in the number of platforms operating in China. Across the Asia Pacific region, 79 percent of firms surveyed viewed the future of regulation as “unclear or unstable” – and an estimated 15 per cent of their operating budget is related to regulatory matters.

Dr Robert Wardrop
Dr Robert Wardrop

Dr Robert Wardrop, Director of the Cambridge Centre for Alternative Finance, said:

“This report marks our third year of tracking the growth and development of online alternative finance industry in the Asia Pacific region. This year’s report illustrates the geographically uneven yet considerable growth of online alternative finance in many countries across the Asia Pacific region.”

Professor Ben Shenglin, Dean of the Academy of Internet Finance at the Zhejiang University, said:

“The alternative finance market in the Asia Pacific region has experienced a challenging period of transformation from quantity to quality. Developing countries have experienced an inadequacy of regulatory capabilities, where too much regulation leads to the cessation of activities altogether, but no regulation leads to a messy market. However, the gradually emerging ecosystem built by enterprises, governments and industry associations will lead to a bright future.”

Naoyuki Yoshino, Dean of the Asian Development Bank Institute, said:

“Fintech innovations often involve the adoption and adaptation of new technologies, and the merging of activities of the financial sector with others such as telecommunications. All of these developments require that the progress of regulatory and supervisory frameworks to address them needs to be monitored as well. We at the Asian Development Bank Institute are very pleased to have participated in this study and hope that its results will provide valuable information and analyses to promote the role of fintech in supporting the development of financial access in Asia.”

Ian Pollari, National Sector Leader, Banking and Global Co-Leader, KPMG Fintech Practice at KPMG Australia, said:

“This third annual comprehensive study of the Asia Pacific online alternative finance market contributes to the growing body of data supporting the region’s development. The 2018 report highlights a Chinese industry with a slower pace of growth that is undergoing regulatory changes to enhance the governance practices and the long-term transparency and sustainability of the market.

“Whilst China remains well entrenched as the largest online alternative finance market in absolute terms, both globally and regionally, the report also shows the rapid growth in the rest of the Asia Pacific region, with both Australia and South Korea recording market volumes in excess of the $1 billion for the first time.”

Dave Dowsett, Global Head of Technology Strategy, Innovation, and Planning at Invesco, said:

“The financial services industry is standing at the threshold of unprecedented disruption. The fourth industrial revolution is upon us, and companies are investing record amounts of capital into innovation to ensure their relevance and competitiveness are maintained. As a part of this fourth industrial revolution, a growing alternative finance industry is changing the way individuals and organisations interact with flowing global capital and envision new kinds of products and distribution methods. The projection for advancement in alternative finance based on the findings uncovered in this report show that the opportunities remain enticing across the Asia Pacific region. As digital experiences mature, traditional financial models and instruments and the emerging technologies driving alternative finance such as artificial intelligence, process automation, and blockchain collide and intertwine.”