10 Big Takeaways from Asia-Pacific Alternative Finance Benchmarking Report
As of 2015, China is the world’s largest online alternative finance market by transaction volume. Between 2013 and 2015, the Chinese AltFi market recorded an average growth rate of 328%. Beyond China, the largest online alternative finance markets in the Asia-Pacific region are Japan, Australia, New Zealand, South Korea, India and Singapore.
These are some of the findings detailed in the first comprehensive study of the Asia-Pacific online alternative finance market, which was conducted by an international research team from Cambridge Judge Business School, the Tsinghua University Graduate School and The University of Sydney Business School in partnership with KPMG.
Here are 10 big takeaways from the report, which surveyed 503 platforms from 17 countries:
The Asia-Pacific market has a significant untapped potential for alternative financing.
In 2015, the total online alternative finance market volume across the region amounted $102.81 billion, providing finance to consumers, start-ups, SMEs, creative and community projects. For comparison, the total size of the UK online alternative finance market in the same year was $4.5 billion.
China’s AltFi market is by far the largest in the world.
The report confirms that China is the world’s largest online alternative finance market by transaction volume ($101.7 billion), making up the bulk of the alternative financial activity in the Asia-Pacific region. There are at least four compelling reasons behind this massive upswing of alternative online lending. Primarily, China is the world’s second-largest economy and has the biggest online retail/e-commerce market globally. Secondly, China has the world’s largest Internet user base (668 million) and the most active social media environment; it also leads the world in smartphone penetration and machine-to-machine connections. Thirdly, the Chinese online AltFi market is largely unregulated. Until recently, its rampant growth has been mostly unrestricted and unchecked. Fourthly, China is marked by the high level of institutional ownership in the online alternative finance sector.
Other prominent AltFi markets in Asia Pacific are Japan, Australia, New Zealand, South Korea and Singapore.
Outside of China and ranked by 2015 total volume, the six largest online alternative finance markets in the region are Japan ($360.23 million), Australia ($348.37 million), New Zealand ($267.77 million), South Korea ($41.18 million), India ($39.91 million) and Singapore ($39.76 million).
China is the largest AltFi market in Asia-Pacific in per capita terms.
In per capita terms, the largest alternative finance markets in the region in 2015 were China ($74.54), New Zealand ($59.37) and Australia ($14.83). In general, the alternative finance volume per capita is in direct proportion to the country’s per capita GDP.
China has the highest level of institutional ownership of AltFi platforms.
While the funding side of the online AltFi market in mainland China is dominated by individual investors, there is a fairly high level of institutional platform ownership. 23% of the surveyed Chinese platforms indicated that their majority interest was owned by a bank or other institutional investor (as opposed to just 6% for the AsiaPacific region outside of China).
P2P consumer lending is the largest market segment in China.
The most prominent alternative finance models in China are marketplace/P2P consumer lending ($52.44 billion lent), marketplace/P2P business lending ($39.63 billion lent) and real estate lending ($5.51 billion lent).
Outside of China, P2P business lending is the largest market segment.
Outside of China and estimated by 2015 total volume, the largest market segment was marketplace/P2P business lending ($355.51 million), followed by market/P2P consumer lending ($326.22 million), balance sheet business lending ($120.62 million), invoice trading ($116.95 million), reward-based crowdfunding ($81.22 million) and equity-based crowdfunding ($64.13 million).
The Asia-Pacific region has relatively high rates of female participation in online alternative finance markets.
Outside of China, female participation is higher on the funding side than the fundraising side with 22% of funds provided and 17% of funds raised respectively. In China, female borrowers account for 40% of both P2P consumer and business lending and over 40% for invoice financing and balance sheet lending. Women also comprise 32% of investors on equity-based crowdfunding platforms.
The regulatory environment for alternative finance across the Asia-Pacific region is diverse and dynamic.
Whilst some countries such as Singapore and Thailand have preferred to regulate alternative finance within pre-existing regulatory frameworks, others, such as Malaysia, New Zealand, and South Korea, have introduced industry-specific regulation. In addition, while the surveyed platforms in New Zealand and Malaysia generally described existing regulation as satisfactory, the platforms in Japan and South Korea were more anxious that regulation is too stringent and Chinese platforms felt regulation was too lenient.
A great part of the Asia Pacific AltFi market has been dominated by marketplace/P2P lending models.
Between 2013 and 2015, the burgeoning alternative finance industry in the Asia Pacific region has been dominated by the prevalence of marketplace/ peer-to-peer lending models. Over the last three years, the combined marketplace consumer and business lending accounted for around 60% of the total market volume (China excluded).