Fintech’s answer to Australian payday problem

No different to drug dealers…

Predatory, exploitative, preying on vulnerable customers.

These are just a few quotes from the media about an industry that has received its fair share of global criticism over the years – the payday lending industry.

In Australian media coverage, you’d be hard-pressed to find a positive word spoken about what is described as “the fastest-growing component of Australia’s finance sector” to date.

Australia’s leading business publication, the Australian Financial Review, recently reported on Cash Converter’s $23 million double class action settlement, for overcharging customers on interest rates.

A leading state-wide newspaper, the Sydney Morning Herald, outlined the record-breaking $19 million fine handed down to The Cash Store earlier this year, for flouting consumer protection laws.

These legal cases demonstrate the positive impact that legislative reform has had on the industry of late, in helping to lift consumer protections and clean up some industry practices.

However, some enterprising financiers have spotted an opportunity to take this goodwill one step further.

So how is technology being used to create a fairer marketplace for small amount personal financing in the Australian market?

A perception problem

A clear distinction needs to be made between our conceptual notions of “payday lending” as developed through the antiquated practices of individual firms, and the purpose of “small-amount credit contracts” generally – as the product is actually legally termed.

Small-amount credit contracts provide small, short-term financing to those experiencing a cash shortfall between paydays.

This was the experience of 63% of all Australians at one point over the year preceding a recent MoneySmart report by the Australian Securities and Investments Commission (ASIC).