Online small business lender Sail just might be one of the last crop of technology companies to ride the “fintech” wave in Australia, with the Sydney-based start-up’s founder and chief executive Yanir Yakutiel warning of an impending investment drought for aspiring fintech outfits.
Sail, which offers term loans of $5000-$100,000 to small businesses, launched in November last year after securing $8 million in seed funding earlier in the year.
It is a relatively new entrant in a space that has attracted plenty of press and investors, but Mr Yakutiel warned that there were indicators the sector might be about to hit a speed bump.
“In terms of the lending market, there’s a definite slowdown in the number of new entrants in the market, there are no real signs of consolidation and capital raising is starting to dry up,” he told The Australian.
Mr Yakutiel said that, while there was still plenty of goodwill out there for fintech start-ups, investors had become much more circumspect about where they placed their next bet.
“So when it comes to real dollars, that’s likely to flow once there’s a clearer picture of the winners and losers in the sector,” he said.
Another factor that could take the wind out of the sails of start-ups is the prospect of the big banks having to reinforce their capital levels to provide a bigger buffer against any potential downturn.
Australian Prudential Regulation Authority chairman Wayne Byres reiterated his commitment this month to press ahead with implementing the 2014 financial system inquiry’s recommendation to make bank capital levels “unquestionably strong”.
This sort of chatter, according to Mr Yakutiel, is likely to see the big banks cool their new-found enthusiasm in fintech. “Any new capital holding requirements for the big banks, any sense of increased volatility, will take more capital away from fintech and also small business lending,” he said.
Small business is the bread and butter for Sail and it is a segment that Mr Yakutiel said had been chronically underserved by the traditional banks. Estimated to be worth $20 billion by 2020, there is plenty of unmet demand that Sail can serve.
“There are over two million ‘mum and pop’ stores in Australia and we are here to serve many of these that are not looked after by the banks,” he said.
Backed by prominent Sydney-based investors and brothers Marc and Gideon Lubotzky, Sail is leveraging the latest technology to sharpen its abilities, whether it is managing risk profiles or securing its customers.
The company already uses an algorithm to crunch all of the relevant applicant information to match the offered loan to the customer’s risk profile and is now turning to biometrics to provide an extra layer of security for its customers.
Sail is looking at “selfies” to add another layer of authentication for its loan applicants and make verifications faster.
Once the ID documents are uploaded, the user receives a text message with a link to take a selfie. The technology instantly matches the face and location of the photo to the uploaded IDs to ensure it all checks out. That means faster lending decisions and greater security for both applicants and lenders.
While opinion is divided on the artistic merits of a selfie, Mr Yakutiel said it just might be the ticket to more secure online transactions. “Fraud is a big cost for all lenders and if we can reduce ID theft it gives our customers a level of confidence,” he said.
Sail is hoping to get the jump on its local peers when it comes to biometrics, but not a lot of family stores are run by selfie-loving millennials.
However, Mr Yakutiel is confident that over time that trend will change. “It’s not something everybody is used to but adoption will pick up; just look at online banking,” he said.
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