This report is based on a survey of over 500 alternative finance platforms in 17 Asia Pacific countries and regions, capturing an estimated 70 percent of the visible market. As the first comprehensive study of the Asia-Pacific online alternative finance market, this research contributes to the growing body of data supporting the region’s potential.
The alternative finance market is developing rapidly in the Asia-Pacific region, creating new ways for individuals and institutions to choose how and to whom money is distributed, lent and invested.
The research was conducted by the Cambridge Centre for Alternative Finance at the University of Cambridge, the Tsinghua University Graduate School at Shenzhen and the University of Sydney Business School, in collaboration with KPMG and with the support of ACCA and CME Group Foundation.
Alternative finance is one of the fastest-growing sectors of the global financial services industry, with 2015 witnessing an unprecedented level of funding. China is the world’s largest alternative finance market, registering a massive US$101.7bn in online alternative finance transactions in 2015 – over 90 times the volume of the rest of the Asia-Pacific region combined. Australia’s US$348 million alternative finance market is the third largest in Asia Pacific and grew 320 percent in 2015.
Looking at the breakdown of funding models, the largest market segment in the Asia-Pacific region (excluding China) by 2015 volume is marketplace/peer-to-peer lending (which accounted for 60 percent of total market volume), followed by balance sheet business lending and invoice trading. Australia leads the way in the region for balance sheet lending, with the sector reporting an average growth rate of over 252 percent between 2013 and 2015. Australia is also leading the way for invoice trading, where volume grew by an average year-on-year growth rate of 1064 percent between 2013 and 2015 to over US$105m in 2015.
The Asia-Pacific region appears to have relatively high rates of female participation in the online alternative finance markets. According to our survey responses, in the Asia-Pacific countries (excluding China), 33 percent of the borrowers on marketplace/peer-to-peer consumer lending platforms are women and 23 percent and 13 percent of fundraisers/entrepreneurs in rewards and equity-based crowdfunding are also women.
The regulatory environment for alternative finance across the Asia-Pacific is diverse and rapidly changing. While the surveyed platforms in some countries (e.g. New Zealand and Malaysia) felt their existing and proposed regulation is adequate and appropriate, platforms operating in other countries (e.g. Japan and South Korea) were more concerned that the regulation in their respective jurisdictions is too strict and excessive. Only 48 percent of surveyed platforms in Australia view existing regulations as adequate and appropriate, approximately 30 percent viewing regulation as too strict and excessive.
This report demonstrates that the Asia-Pacific online alternative finance market is fluid, diverse, increasingly complex and growing at a rapid pace. The opportunities for the world's most populous region to harness the potential of alternative finance for innovation, economic growth, market efficiency, and creativity are abundant.
The present challenge is how to best nurture the alternative finance industry, grow the market in a sustainable manner and develop an appropriate and proportionate regulatory regime that strikes the right balance between encouraging financial innovation and protecting the interests of consumers and investors.