It’s hard to believe that the world of finance stopped on a Friday at four in the afternoon thirty or so years ago – so much so that if you didn’t get money out at a bank in time you’d be broke for the entire weekend. Now, financial technology (Fintech) is everywhere. We can access finance at the touch of a button from loans, credit, cryptocurrency, and much more. What does finance in the online world look like in Australia? What are the big players, and how can you harness online finance for your needs?
Traditional banks
Australia’s financial sector is dominated by the “Big 4” banks; Commonwealth Bank, NAB, ANZ, and Westpac (in order of market cap.) There are many smaller banks and credit unions (with some being substantially or wholly owned by the big four.) Though slower to innovate than some Fintech startups, they have embraced online finance through internet banking, trading, and loan application software. However, getting finance from one bank may not be the best solution in many cases.
Online brokerages
Online finance brokers (individuals) or brokerages (companies) are entities that don’t lend out funds directly. Instead, they consult a panel of banks and credit unions to present a range of loans for you to choose from. This gives you greater competition for your business and theoretically better terms or interest rates than simply going to one bank or institution. These brokerages, like Savvy and other online brokers, streamline the process by using secure fintech to verify documents, conduct credit checks and compliance, and deposit the funds into your account, which means they can act faster so you can seize upon opportunities quicker. In exchange for their services and management of your loan, they may take a fee or commission. This varies from broker to broker.
P2P loans and credit
Peer to peer or marketplace lending is a new way of securing funds instead of going through banks or credit unions. Instead, you connect with private investors who may set their own rates and lending criteria, usually less strict than banks or traditional lenders. These are usually brokered through online platforms – and you can both be a borrower or an investor at any time. Remember to check if they have an Australian Financial Services licence before you proceed.
How to use finance to your advantage
Gaining finance allows the modern economy to work. Since inflation will erode our savings for a car or house by the time we save up enough money, finance allows ordinary people to pay off large assets over time. The idea is to purchase assets that appreciate, or increase, in value relative to the interest paid on the loan. For example, using the equity in your home to finance the purchase of an investment property or shares, or even starting a home business (which can be the highest profit investment out of the three) can help you generate income and wealth for the long-term.
The Australian financial sector is exciting – and you can take advantage of it now more than ever thanks to new innovations and technology!
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