STATEMENT
The AustralianSmall Business and Family Enterprise Ombudsman, FinTech Australia and theBankDoctor.orgtoday joined forces to release a report which outlines the steps taken by fintech lenders to increase transparency anddisclosure.
The report, Fintech lending to small and medium sizedenterprises: Improving transparency and disclosure, analyses the differentapproaches to disclosure across the fintech industry and makes recommendationson best practice and identifies commitments to action.
Ombudsman KateCarnell said Australia presents a huge opportunity for the fintech industry, inthat it provides a genuine alternative finance solution for small businesseswhere traditional banks are limited in their capacity to serve the sector.
"I commend thefintech industry for embracing the need to improve transparency and disclosureand its leadership in the financial services industry in addressing the needsof small business borrowers," Ms Carnell said.
"This reportinforms both the fintech industry and small business borrowers of the steps beingimplemented to allow an easy comparison of products and to ensure loanagreement contracts comply with the unfair contract terms legislation."
FinTech AustraliaCEO, Danielle Szetho said the report explains how fintech business lenders areable to help Australian small to medium businesses access the funds they needto grow.
"Through the useof technology platforms which analyse rich, real-time business financial dataand deliver easy-to-use and fast application processes, fintech businesslenders are making a real difference to small businesses," Ms Szetho said.
"However, likemany financial services products, lending contracts are complex and have thepotential to be complicated and confusing.
"It’s for thisreason our lenders have decided to work together - in a historic move forAustralia’s fintech industry - to help define best-practice transparency anddisclosure.
"This reportrepresents an important step in this initiative, by analysing the differentapproaches to disclosure across the industry and suggesting a way forward todrive results which are in the best interests of the customer."
Independent SMEfinance expert, Neil Slonim from theBankDoctor.org said small business owners,who were time poor and often financially unsophisticated, found it difficult tomake fully informed decisions when borrowing from fintech lenders.
"We need a levelplaying field for both borrowers and lenders so business owners are able tomake fully informed decisions and lenders can compete on an equal footing," MrSlonim said.
"Put simply,borrowers should be able to answer three simple questions: Is this the rightproduct for my needs? Do I know exactly what it is going to cost? Do I knowthat I can’t get a better deal elsewhere?
"This report highlightswhere and how fintech lenders can implement consistent transparency practicesthat will create better outcomes for SMEs and help build further credibilityand trust in the fintech lending sector."
Items for actionin the report include:
- the development of an industry Code of Conduct tocover fintech balance sheet lenders offering unsecured business loans by June2018. This is proposed to be a customer-centric document that will prescribewhat a customer can expect in terms of transparency and disclosure from alender.
- expanding this Code of Conduct to other fintechlending and finance products over time
- Fintech lenders to agree to the contents of an easy-to-understandcontract summary page by June 2018. This summary page would include a common setof measures when making loan offers to customers.
- the ASBFEO and theBankDoctor.org to worktogether to produce a guide to assist small business owners better understandthe ‘ins and outs’ of borrowing from a fintech lender. This will also bepublished by June 2018.
The report alsoincludes a Glossary of Common Lending Terms as a first step toward driving aconsistent industry-wide approach to the communication of these terms, whichshould ultimately make different contracts easier to understand and compare.
A series ofrecent reports have confirmed the increasing role of fintech lenders deliveringan alternative source of funds to businesses.
For instance, the2nd AsiaPacific Alternative Finance Industry Report released inSeptember 2017 found that Australia had leap-frogged Japan to become thelargest alternative finance market in the Asia Pacific after China. An 80%increase in business balance sheet lending, between 2015 and 2016, was largelybehind Australia’s improved Asia Pacific position.
For background information about howfintech lenders are helping small businesses to access funds, see this analysis on theFinTech Australia website.
To download a copy of the research goto www.fintechaustralia.org.au, www.asbfeo.gov.au or www.thebankdoctor.org
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