The Australian Small Business and Family Enterprise Ombudsman, FinTech Australia, and theBankDoctor.org have released a report which outlines the steps taken by fintech lenders to increase transparency and disclosure.
The report, Fintech lending to SMEs: Improving transparency and disclosure, analysed the different approaches to disclosure across the industry and makes recommendations on best practice and identifies commitments to action.
Ombudsman Kate Carnell said Australia presents a huge opportunity as it provides a genuine alternative finance solution for small businesses where traditional banks are limited in their capacity to serve the sector.
“I commend the fintech industry for embracing the need to improve transparency and disclosure and its leadership in the financial services industry in addressing the needs of small -usiness borrowers,” Ms Carnell said.
“This report informs both the fintech industry and small business borrowers of the steps being implemented to allow an easy comparison of products and to ensure loan agreement contracts comply with the unfair contract terms legislation.”
FinTech Australia CEO, Danielle Szetho said the report explains how fintech business lenders are able to help Australian small to medium businesses access the funds they need to grow.
“Through the use of technology platforms which analyse rich, real-time business financial data and deliver easy-to-use and fast application processes, fintech business lenders are making a real difference to small businesses,” Szetho said.
“However, like many financial services products, lending contracts are complex and have the potential to be complicated and confusing. It’s for this reason our lenders have decided to work together – in a historic move for Australia’s fintech industry – to help define best-practice transparency and disclosure. This report represents an important step in this initiative, by analysing the different approaches to disclosure across the industry and suggesting a way forward to drive results which are in the best interests of the customer,” she said.
Independent SME finance expert Neil Slonim from theBankDoctor.org said small business owners, who were time poor and often financially unsophisticated, found it difficult to make fully informed decisions when borrowing from fintech lenders.
“We need a level playing field for both borrowers and lenders so business owners are able to make fully informed decisions and lenders can compete on an equal footing,” Slonim said. “Put simply, borrowers should be able to answer three simple questions: Is this the right product for my needs? Do I know exactly what it is going to cost? Do I know that I can’t get a better deal elsewhere?”
The report highlights where and how fintech lenders can implement consistent transparency practices that will create better outcomes for SMEs and help build further credibility and trust in the said sector.
In response to the report Beau Bertoli, joint CEO of small-business lender Prospa, said,”“We’re delighted to be working with the Ombudsman, Fintech Australia and theBankDoctor.org to develop a framework that will help standardise disclosure, and increase awareness of fintech lenders as an alternative to traditional banks. In the same way fintech has disrupted the finance industry with better borrowing experiences, we’re looking to do the same when it comes to standardising disclosure.
“As a relatively new industry, fintechs have always been acutely aware of how important it is to build trust through transparency and disclosure. Prospa, and others, have been ahead of the curve when it comes to self-regulation.”