Fintech disrupters see bright side

A looming recession hasn’t dampened the spirits of disrupters in the payments, digital bank and mortgage-lending industries.

Tyro’s Robbie Cooke

A looming domestic recession hasn’t dampened the spirits of disrupters in the payments, digital bank, mortgage and small business lending industries, as they cheer the faster take-up of online models.

Speaking at a webcast Morgan Stanley conference on Wednesday, industry players said the COVID-19 turmoil had not been as dire as feared, even though some acknowledged the real test would occur when loan repayment and rent deferrals ended.

Aris Allegos, chief executive of small business lender Moula, said conditions for businesses had “improved dramatically” since hitting lows in March and early April.

But he admitted it would take some time for businesses to adapt to the reopening of the economy in stages, and then rent and lending obligations when they started to kick back in.

Tyro Payments CEO Robbie Cooke said the JobKeeper stimulus package was “hugely important” in getting funds to businesses and helping them survive.

ASX-listed Tyro provides payment terminals to retailers and businesses giving it an insight into how they are navigating the challenges.

Mr Cooke is optimistic about how the business sector will fare from here. “We won’t see the failure rates that some pundits are expecting,” he said.

Tyro saw a slowing but not a complete freeze in inbound inquiries for its terminals during the initial weeks of the COVID-19 shutdown, Mr Cooke added.

Start-up lender Athena said just 0.15 per cent of its mortgage customers requested hardship during COVID-19, compared with levels of between 5 per cent and 10 per cent across many larger rivals.

Listed buy-now, pay-later group Zip said it was taking credit quality and responsible lending “very seriously”, given there were still many unknowns around economic growth in the year ahead.

“We are being more cautious (around credit quality) at the moment,” Zip chief commercial officer Hamish Moline said.

But on the company’s overall growth prospects he remains bullish. “We are excited … on the future growth potential,” Mr Moline said. “COVID has certainly accelerated that (shift to digital payments).”

This week Zip announced the acquisition of US firm QuadPay, which has been applauded by investors. The stock gained a further 22.1 per cent on Wednesday to $6.35, after a stellar rally the prior day.

“We’ve just started really,” Mr Moline said of Zip’s offshore and domestic expansion plans.

Digital bank 86 400 — which has transaction and savings accounts and lending products — said it was gaining traction with customers but there was still a way to go for new players to bolster awareness.

86 400 CEO Robert Bell said the bank was being helped by the fact it had funding sources including deposits, warehouse facilities and wholesale markets.

But it hasn’t all been positive for new digital banks with Xinja — which has started offering savings accounts but not home loans — applying to put some staff on the JobKeeper subsidy.

Athena’s co-founder Nathan Walsh said he was upbeat on prospects for digital mortgage players, outlining expectations the 3 per cent of loans originated online would grow to about 30 per cent over the next decade.

He also anticipates “real opportunities” for superannuation players to increasingly look at funding mortgages as an asset class.

Payment services and financial infrastructure group Airwallex said the global pandemic was changing the psychology of consumers and businesses towards fintechs “quite rapidly”.

Airwallex’s corporate development boss, David Stein, said he expected the industry to see a combination of a spate of new entrants and rationalisation over the next few years.

“There is going to be a flood of interest,” Mr Stein said, noting he expected the fintech sector to follow a similar path to the gig economy.