In the digital age of instant gratification, consumers are demanding quick and easy access to loans, and their needs are being increasingly served by fintechs using the latest technology.
The coronavirus pandemic has certainly accelerated the rise of fintechs and the creation of sophisticated technology to provide a multitude of lending solutions.
KPMG’s Fintech Landscape 2020 report released in December shows there are 733 active fintechs, up from 629 in September 2019. There has been particular growth in fintech lenders, especially those serving the consumer and SME markets, as well as neobanks. FinTech Australia, the peak body for fintechs, has released the EY FinTech Australia Census 2020 report, showing that fintech lenders and challenger/neobanks are on the rise.
The report, produced in conjunction with EY Financial Services, shows that lending makes up 29% of the sector, the second-biggest fintech type after payments, while challenger/neobanks comprise 14% of fintechs.There has also been strong investment in large scale-ups, including Athena Home Loans and Judo Bank, and ASX listings such as Plenti Group. More recently, there are plans to merge Lendi with Aussie Home Loans.
Australian Broker asked non-bank SME lender OnDeck Australia, car loan brokerage CarClarity, FinTech Australia and ANZ to share their thoughts on fintechs, how the sector is disrupting traditional lending, and what further technological changes we can expect.
CarClarity can be thought of as a fintech brokerage but for car loans, rather than residential homes or commercial lending. The Sydney-based business was established in March 2020 and has already grown from five staff to 15.
Founder Zaheer Jappie says CarClarity provides a simple-to-use platform that connects borrowers with more than 30 different car finance lenders.
“It matches each customer with lenders based on the optimal price and loan terms for that individual’s needs,” he says. “Once the best borrowing option is chosen, borrowers are guided through an online application process to secure their financing. We operate as a broker function but focus on the digital customer experience and have smart integrations.”
Consumer expectations of fast results are helping fintechs such as CarClarity make inroads into the lending market.
“We now buy everything online, and everything is instant. This customer expectation has moved to financial services, and each year different financial products start to innovate more. We are leading this innovation in Australia for car lending and giving customers an online, instant and transparent experience in car financing.”
Jappie says there are three factors that set CarClarity apart from its fintech competitors.
“Our first thing is our people. We believe we have built a strong, experienced team and all share the same values in our customer obsession.
“Our second thing is our overall customer experience. We want to ensure customers start digital and obtain 90% of what they need online and then speak to an experienced adviser to make an informed decision on car financing.
“Thirdly, we invest heavily in innovative technology and are leading the charge in fast, reliable and transparent car financing solutions that are transforming the way Australians shop for and finance cars.”
The COVID-19 pandemic was unexpected and unfortunate but has created opportunities in car financing and purchasing, Jappie says. “It has favoured a more online digital approach, which puts CarClarity in a great position.
“Due to travel restrictions and social distancing laws, we have seen an increase in private sales, particularly of larger four-wheel drives, with customers doing more local travel and camping. Our demand actually went up as people focused on near-new used cars as new-car stock intake dropped due to COVID.”
With tech evolving there is also more data available from industry sources to help make data-driven products accessible to customers.
“Open banking will open a lot of doors, but we still rely on larger institutions to improve their technology stack/APIs [application programming interfaces],” Jappie says.
Technology has already changed since CarClarity began a year ago, and new innovations are on their way.
“We are always working on simplifying the opaque process that is applying for car finance, and had multi-variations over the last year,” Jappie says.
“In terms of what’s to come, we are implementing digital ID/biometrics validation and integrating an open banking platform to assist customers in completing an online application. We are also launching a dealer finance solution to assist with regulatory changes towards the end of the year.”
Jappie says CarClarity is pro open banking.
“Our financial health does mostly sit within our bank accounts, and utilising this data for finance applications will make it simple for customers to obtain, move and grow their financial needs with ease.
“This will allow smaller institutions like CarClarity to compete with large incumbents because we will have a very big picture of the customer’s financial position.”
There are plenty of reasons why brokers should use CarClarity.
“Our ambitions are to provide tools for anyone. CarClarity’s platform is partner-friendly, and if a non-asset-finance broker has a client we would happily assist,” Jappie says.
“I think we are bringing more awareness to customers about brokers. We have a very firm stance on the disadvantages of not going to a broker, which we advise the customer on. Our main goal is seeing a customer get the right information to make an informed decision, whether with us or with another broker.”
The fintech sector is growing in Australia, Jappie says.
“We will see a lot of players locally become global businesses as there is more venture capital flowing into Australia. However, there will be a huge shortage of tech talent due to COVID and visa implications.
“Globally, more and more fintechs are becoming bigger than traditional incumbents, and in 2020 alone we saw a lot of public listing activity.”
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