- New research from the Australian Bureau of Statistics shows the demand for personal loans is growing in Australia
- Along with demand growth, the number of consumers choosing non-bank lenders over the big banks is also on the rise
- One fintech stock offering personal loans is MoneyMe (MME), which says faster transactions and high client satisfaction levels are fuelling its growth
- MME says it assesses applications within five minutes, and approves and transfers cash within an hour, using its artificial intelligence based platform
- MME has recently launched a loan product for vehicles and shares closed up 7.66 per cent at $2.25 per share on Wednesday, June 30
Australians love using personal loans, with new data from the Australian Bureau of Statistics showing a recent 4.8 per cent hike in the number of new loans.
The increase reported in April wasn’t entirely unexpected, with interest rates at a record low of 0.1 per cent thanks to the Reserve Bank’s consistent cuts.
Considering how cheap it is to borrow money now the question for consumers isn’t ‘should I take out a personal loan?’, but ‘which company should I borrow from?’.
Unfortunately for major banks, ABS figures show consumers are increasingly moving away from them when it comes to taking out personal loans.
It’s likely the rise in neo-banks (online-only banks) and fintech businesses is driving this trend, with hundreds of these companies now established across Australia.
This new breed of lender differentiates itself through their use of technology which allows for faster processing times, high customer satisfaction levels and lower operating costs.
One business which has found particular success with its lending technology is MoneyMe (MME), an ASX-lister that uses artificial intelligence to assess loans in under 60 minutes.
MME says it can grow further thanks to its technology, expanding loan capabilities and the shift away from major banks, alongside increasing demand for personal loans.
Who wants a loan and from where?
Along with an uptick in personal loans, the Australian Bureau of Statistics noted in its recent Lending Indicators Report that the value of those loans was also rising.
It reported a 25.2 per cent jump in the value of new peronal loan commitments for the month of April, with the value of car loans rising 3.6 per cent.
Once a person has decided on the value of the loan, it’s now more likely they will look beyond the banks for help.
The big banks’ personal loan market share fell from 86 per cent in 2010 to 72 per cent in 2018, according to research by the ABS.
A boom in fintech companies was the likely cause for this slowdown, with dozens of ASX-listed stocks, such as MoneyMe, entering the market.
In fact, ABS figures show non-bank lenders doubled their slice of the personal loan market, from 14 per cent to 28 per cent, over that same eight-year period.
Beyond competition, another reason consumers may look beyond the big banks for a personal loan was the issue of timing.
Virtual lenders such as MoneyMe offer consumers approval times of under 60 minutes, meaning the funds can be transferred within the same day.
Company CEO Clayton Howes said many consumers were looking for convenience when shopping for a personal loan.
“Customers were looking for speed, simplicity and fair pricing, and were moving away from the slow incumbents,” Mr Howes said.
“We have been seeing MoneyMe’s automation delivering money to our customers’ accounts in minutes, creating a huge advantage for the business.”
As well as trying to beat the banks on approval times, MoneyMe said it was also aiming to outpace its peers by offering application times of under five minutes.
MME’s CEO explained it had the capacity to do this because its Horizon Technology Platform used artificial intelligence to assess a user’s applications.
“We created an edge in predicting risk using high-powered artificial intelligence to analyse data in real-time while a customer is providing us with information in an application journey,” Mr Howes said.
“This is a breakthrough in innovation and it means we get to understand the financial habits and risk of an applicant faster and better than a human performing the task.”
The company offers a number of different products in the personal loan market, the most obvious of which is its personal loan for up to $50,000.
Beyond personal loans, MME offers a virtual MasterCard called Freestyle, which it describes as its disruptor product to the banks’ credit cards, as well as lines of credit.
It also sells two buy-now-pay-later-style products for those in the real estate market. These offer the use of deferred payments when managing or selling a property.
And more recently MoneyMe launched AutoPay — a finance product designed to offer personal finance for those looking to buy a new or used vehicle.
MME said the new product had been a clear winner, racking up more than $1.2 million in total cars financed in the weeks after it launched, with those figures expected to double in the next month.
To keep up with the rapid growth, the company announced earlier this month that it would expand its warehouse loan facility.
MME’s Horizon 2020 warehouse facility now totals $256 million following the additional $22 million in mezzanine note funding being issued.
Looking ahead, the company’s CEO said he believed the big banks’ share of the loan market would continue to decrease as companies such as MME made lending both faster and more simple.
“MoneyMe’s growth trajectory has been incredible and now with Autopay, we are well positioned to take more market share from banks with our innovate set of products and winning customer experiences,” Mr Howe said.
Shares in MME were trading up 7.66 per cent at $2.25 per share at the close of mark on Wednesday, June 30.