Online Alternative Finance in AP region grew 136%

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Cultivating Growth: Online alternative finance in the Asia-Pacific region grew 136 per cent
last year to $245.3 billion, says the 2 nd 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 2 nd
Asia Pacific Alternative Finance Industry Report reported today (20
September).

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The report can be found via: https://www.jbs.cam.ac.uk/faculty-
research/centres/alternative-finance/publications/cultivating- growth
The report, entitled Cultivating Growth, was produced by the Cambridge
Centre for Alternative Finance at University of Cambridge Judge Business
School, 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, 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 5 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.
As for Mongolia alternative finance market was 0.26 million in 2016. It is
relatively new concept for Mongolia and only few platforms offer online
lending and crowdfunding services. But it still has a good potential for
development.

“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, 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, 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.”

Professor Edward Buckingham, Executive Director of the Australian Centre
for Financial Studies, said: “Fintech-enabled alternative finance has
triggered diverse policy and entrepreneurial responses, which are shaping
the future of the financial services sector…. The many emergent forms of
alternative finance will profoundly shape our economies for decades to
come. They promise to challenge the regulatory environment, test political
will, and challenge our ability to embrace change.”

For further information
For the Cambridge Centre for Alternative Finance
Charles Goldsmith
Head of Media Relations
Cambridge Judge Business School
c.goldsmith@jbs.cam.ac.uk
+44.7912162279

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