Australia is fast emerging as a new hub of the online alternative lending market. It grew by a staggering 320% in 2015 with the market size at nearly USD $350 million. Now, Australia is the third largest online alternative finance market in the Asia-Pacific region behind China and Japan. Therefore, it comes as no surprise why more and more start-ups are looking to tap the opportunity in this region. A look at the previous year’s growth rates will also highlight the exponential build-up in the sector.
One such start-up making its name in the Australian FinTech industry is Enably, which offers loans in the consumer lending . Headquartered in Perth, Enably was founded by David Brennan as Loan Ranger in 2013 and recently rebranded as Enably under the management of the current CEO Andrew Kirkwood.
In its most recent round of funding, the company raised AUS $3.5 million equity and AUS $15 million for a debt facility, which can be further increased to AUS $30 million. The round was led by Corbin Capital, a New York-based investment management firm.
How Enably Enables Loans for Aussies
Brennan came up with the idea for Enably while studying the effects of change in customer demand and regulations in the U.S. and UK FinTech industries. He grasped the power of this disruptive technology and realized the methods used by banks to service customers are obsolete.
The loans Enably provides range from AUS $ 1,000 to AUS $ 10,000 for up to 24 months. Though it might look like an LC or Prosper copy, it is based on a different philosophy. Its product competes on price as well as service, but what sets Enably apart is it’s 100% balance sheet model.
Brennan was not content with consumer lending and looked at other markets to service, so he zeroed in on SMB. Since that was a young market, Kikka( its sister company) played it safe by striking a licensing partnership with Kabbage and developing its own CRM in order to customize its credit engine per the needs and demands of the Australian small business market.
In a short span of time, Brennan and his team had built two successful businesses under one roof. To avoid any confusion, both companies have different staff and target markets.
Since the Australian government promotes research and development and offers tax rebates for companies engaged in R&D, Enably developed a factoring product they plan to launch soon as Radiant Capital. This new arm of the business will provide loans against receivables of the R&D tax rebate. To keep the functioning of all three companies separate, different CEOs have been appointed. Brennan currently serves as CEO of the SMB division.
Brennan’s companies are debt funded by American wholesale lenders. Though they have certain financiers from Australia, they are actively diversifying their funding sources and looking to reduce the cost of capital. The consumer lending arm has lent almost AUS $30 million. The SMB arm has done AUS $6 million in last 12 months and plans to expand its credit line to AUS $15 million. The new funding will allow Enably and Kikka to move beyond short-tenure loans to longer tenures and larger loans.
Keeping an Eye on Australian FinTech Opportunities
Australia is a great opportunity for FinTech companies. There are potentially 24 million customers not being served properly by the banks, but the Australian market has its own peculiar characteristics. Though there are over 15 serious players, the industry is still in the market education phase. Another issue is that credit card refinancing is not a big market, so it is standard for Australians to pay down their credit cards at the end of the month. This behavior, though good for the borrowers, keeps lenders from offering debt consolidation products. Instead, Enably focuses on financing holidays and major purchases for consumers.
The Australian regulatory scene has also cleared up. The sector has experienced significant oversight and regulatory changes in the last 3-4 years. Young lenders are held to the same standard as banks, which has led to several compliant operators leaving the market.
Brennan’s companies are in a sweet spot. The current consumer credit market is estimated to be over $170 billion in Australia. Morgan Stanley predicts that online consumer lending will grow to around $10 billion by 2020. The same report estimates that small business online lending should grow to $11 billion by 2020. The market is still developing, and getting in early will allow companies to establish a strong foothold in the market. Since Australians are tech savvy, it’s a matter of time before consumers shift to the hassle-free experience of online lending. With over $33 million of funding, Enably is in a prime position to become the leading player in the market.
Written by Heena Dhir.