Peer-to-peer (P2P) lenders are looking at potential opportunities in the small to medium-enterprise market as a way of growing their market share, a report out this morning says.
The KPMG non-bank financial institutions performance survey labels P2P lending as the major disrupter to the personal/consumer market.
There were four licensed P2P lenders in the market - Harmoney, Squirrel Money, LendMe and LendingCrowd.
KPMG head of financial services John Kensington said with more P2P lenders planning to venture into other markets such as property lending, vehicle and equipment finance, competition would not ease in coming years.
The impact was not from the amount lent - said to be $150 million - but more from the efficiency and sharpness of their distribution models, their agility, and the fact they provided yet another option for borrowers, he said.
LendMe was aiming to focus on secured loans up to $2 million in the SME market.
However, it was still in the process of negotiating a funding deal with an unnamed New Zealand bank.
P2P lenders were making use of online platforms in an attempt to reduce borrowing costs, create efficiencies and obtain national reach, together with speed of delivery, Mr Kensington said.
‘‘Many sector participants felt it is becoming critical to better utilise technology to remain competitive in the non-bank sector of the market.
‘‘While the front offices of P2P lenders appear to be technologically impressive, there remain questions as to how mature the back office functions are.''
Some of the concerns around P2P lenders voiced by the executives surveyed by KPMG included the perceived limited regulatory oversight, with P2P lenders not being subject to ‘‘responsible lending guidelines'', the reduced visibility of potential losses as the asset book and performance were not reported in the traditional way in a set of financial statements, he said.
The P2P entities were set up in very benign times of full employment and low interest rates and were yet to be tested in a downturn. Many surveyed felt the P2P entities and their strengths would not be tested until they had been through the full economic cycle.
Lessons had been learnt abroad with Quakle, in the United Kingdom, going under in 2011, and some P2P lending websites closing in China as borrowers defaulted, Mr Kensington said.
‘‘There is no doubt this is an interesting development.''In reviewing the 48-page report, Mr Kensington said it had been a year of fast-paced competition and change for the country's non-bank financial sector.
The sector reported profits of $254.62 million in 2015, a 6.7% fall from 2014. Although there were strong increases in interest and other income, that was more than offset by an increase of operating expenses of $48.5million.
The performance was remarkable considering the present low interest rate environment and the intense competition coming from both existing market players and the new entrants, he said.
Another theme of the year was the level of sales and acquisitions.
GE Capital had signed agreements to sell its New Zealand consumer and commercial financing businesses.
Soon-to-be-rebranded Warehouse Money was now wholly owned by the Warehouse Group and Fisher & Paykel Finance had sold to ASX-listed FlexiGroup for $315 million.
‘‘Executives we spoke to believe this natural disruption will create some significant opportunities in the sector, given some long-term relationships within those businesses have come to or are coming to an end.'
