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If you’ve been keeping an eye on the finance sector in the past few years, you’ll have seen the rise of more and more forms of alternative lending.
Technology is changing the business environment, making it easier for nimble, innovative companies to challenge the dominance once held by the big banks.
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The truth is that finding capital when you need it is no longer as simple as choosing between the array of products offered up by the usual suspects. Today, more than ever, the race is to the swift, not to the strong.
A lending revolution
There’s a growing alternative lending industry in Australia, and certainly worldwide, that is quietly revolutionising the way borrowers interact with lenders. The finance and credit industry works by allowing the big banks to keep the lion’s share while creating a large enough umbrella for smaller companies to target niche markets and needs.
As the former Head of Credit at the ANZ, I’ve seen first-hand how a little bit of innovation can spearhead a new finance trend. Peer-to-peer lending is just one example of a finance model that has wrested consumers away from the services of the big banks, matching them with lenders currently starved of yield. It is the true definition of a free market where genuine value is always the real draw card.
An alternative option
Another example of a new finance model that has the potential to really go the distance is the personal asset loan. It has struck me for years that the industry was missing a huge opportunity in ignoring the way people use their private passions as a source of value - like my art collection. My private passion is art collecting. I’ve spent years scouring the art galleries and dealerships of Australia to find obscure pieces by favourite artists. It always amazed me that mainstream lenders failed to recognise this asset class as sound collateral.
Already popular overseas, particularly in the UK, the concept of personal asset lending is not a new one. borro, a UK personal asset lender, has stolen a march on the competition in lending to entrepreneurs, business owners and high net worth individuals secured against their high end valuables. Assetline, of which I’m a director, is pioneering this model in Australia. Rather than mortgage their futures, there’s a certain appeal for borrowers who can instead unlock the equity in valuables they already own. If you think about it, it’s much more appealing to bank your past than risk your future.
Educating the market
The biggest challenge facing any new entrant or offering to the finance market is education. I’ve seen the initial market entrance of many up-and-coming financial service companies falter on their inability to tell customers why they’re really in business. The US and UK are several years ahead of us, and the path they’ve cut looks very exciting. I’ve spent my career shaping the next big thing, and now I’m passionate about being a part of this growing industry from the ground up.
There’s an old business joke that I’m sure you’ve heard: “I liked the shaver so much, I bought the company.” That was a famous ad line from Victor Kiam, the inveterate US entrepreneur from the 1980s. I always thought he must have been exaggerating just a little. Surely Remington’s electric shavers must have had something else going for them than just a great product - an attractive market, a growing industry for example. However, now I think he may have been onto something. After many years in commerce, you begin to get a feel for when a new industry has potential.
Peter McMahon, Director Assetline
Peter McMahon served as Head of Credit at ANZ, Managing Director and Chairman of Esanda and Managing Director of Costain Australia as well as being the founding Chairman of Melbourne's Federation Square. He has recently joined the Board of Assetline.
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