With open banking on the horizon in Australia, fintechs are jostling for position in the SME online lending marketplace.
One fintech that has been cultivating a sweet spot over the past 3 years in this regard is Valiant Finance, a small business loan aggregator and broker. This week the company announced it had entered into a referral deal with one of Australia’s largest banks, Westpac, in a model that bears hallmarks of the British Business Bank referral program. The platform is keen to work with other banks, and will no doubt hope it can convert business successfully with its 70 online lenders, free of pricing criticism, as a proof of concept.
There was another bright spot on the business lending horizon this week too, with news industry super funds have increased appetite to deploy capital into the business lending sector. While probably not quite the same target market as Valiant, a shift of capital into the local economy is the jobs kicker and growth driver that could transform certain sectors of Australia. How Australia navigates its transition from a resource driven economy to a knowledge one still draws a blank. And time is running out.
But deploying capital is one thing – assessing risk around who to deploy it to is another. So the news that super funds want to get into this space should make those businesses with smart credit risk engines and technology sit up and take notice. There is a whole new breed of customer that has flagged they are open for business.
It won’t be easy though, and the challenges will be significantly different. Super funds don’t typically have a strong penchant for technology, and the depth of product experience internally is weak. However as a blank slate, it is an interesting proposition, especially compared to trying to integrate or spin something up inside a legacy banking environment where the old must continue to be serviced alongside the new.
Maybe a tie up between a business like Valiant and an industry super fund is a match made in fintech/incumbency heaven – ready capital, an online brokerage, and lenders willing to cut the deals and, more importantly, deal with the customers. Unlike the banks, super funds are quite happy to have zero engagement with their customer base, and have no need to ‘own the experience’. The lenders are pursuing debt facilities with banks, why not super funds? Valiant could even help match make those discussions.
Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.