FSA COMMITTEE
FINTECH FRIDAYS
14th May 2021
Fintech Disruptor Breaks Australian Venture Capital Record
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Local mortgage industry Fintech Athena Home Loans has recently broken the record for the largest capital raise completed entirely from Australian backers, raising $90 million in fresh capital.
Founded in 2017 by two former NAB bankers Nathan Walsh and Michael Starkey, Athena has focused on refinancing the market through a cloud-based home-loan platform designed as an alternative to the ‘Big Four’. The company claims to help Australians pay off their home-loans sooner, by offering lower rates than competitors with no fees, which are automatically lowered if a customer pays off a portion of their loan faster than expected.
Seven of the company’s largest investors AirTree Ventures, Macquarie Bank, AustralianSuper, HostPlus, SunSuper, Salesforce Ventures, and Apex Capital all took part in the recent offering helping the company raise $200 million to date. AirTree Ventures partner James Cameron said his fund was pleased to double down on its investment in Athena during this recent round of funding.
This isn’t the first time Athena has set a local capital raise record. Back in 2017 the company raised $70 million which at the time was the largest ever led by local venture funds.
Although Covid-19 slammed the brakes on new property sales for a majority of 2020, Athena managed to double its loans last year. This is attributed to the re-financing market staying strong. However, currently customers taking out new mortgages now make up 40% of Athena’s loans and the company is set to pass $2.5 billion of loans settled in the coming months.
The company has now also reduced its interest rates for customers with a 60% or better loan to valuation from 2.19% to 1.99%, in what’s believed to be the lowest variable rate currently available in the market. Athena estimates that customers switching from one of the big banks will save on average $56,000 over the life of their loan.
Both co-founders believe that the company has plenty of room for growth in the local market stating that banks make up 93% of the home loan markets in Australia compared to overseas where they only represent about 70% of any given market.
References:
https://www.afr.com/technology/fintech-athena-breaks-aussie-vc-funding-record-20210504-p57oub
https://www.afr.com/technology/mortgage-disrupter-sets-new-funding-record-20191016-p531dg
https://www.smartcompany.com.au/startupsmart/news/athena-home-loans-70-million/
Federal Budget Brings Welcome News to Fintech Sector
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The Morrison government unveiled its budget plans for the post-COVID recovery in Canberra on Tuesday night, including substantial support for the fintech sector. Treasurer Josh Frydenberg announced a $1.2 billion Digital Economy Strategy, which will fund several initiatives aimed at helping the sector mature out of the market volatility of 2020.
One of the government’s most prominent initiatives includes $111.3 million earmarked towards the rollout of the Consumer Data Right in the banking sector. The CDR provides consumers with greater access to, and the ability to safely transfer, their data to trusted third parties. Many experts, including Rebecca Schot-Guppy predict that a widespread rollout of the CDR will facilitate increased competition in the banking sector, paving the way for neobanks to capture a larger market share.
The Digital Economy Strategy will also bring about changes to the way businesses are allowed to depreciate software, patents, designs and copyrights. Currently, existing law mandates that such assets are considered intangible and their depreciation life is prescribed by law. However, under the changes, businesses will have the option of being able to self-assess the effective life of the asset, giving the intangible asset the same status as a tangible asset. This will almost certainly re-orient the Australian tax system in favour of the fintech sector, allowing firms to take advantage of depreciation deductions and save on their tax bill.
Whilst the Digital Economy Strategy has generally been warmly received, some critics have voiced concerns. The headline figure of $1.2 billion is not as impressive as it initially sounds, particularly given that it is spread out across 6 years, rather than the usual budget stretch of four. Furthermore, almost half of the $1.2 billion is allocated towards upgrading the government’s own digital assets, such as myGov, as opposed to aiding the private sector.
Nonetheless, the Digital Economy Strategy has brought mostly welcome news to the fintech sector. Many of its initiatives will facilitate fintech’s advancement in Australia’s post-COVID economy, indicating a broader shift in how the government perceives this new and emerging sector.
References
https://www.afr.com/politics/federal/software-tax-breaks-in-1-2b-digital-strategy-20210505-p57oyz
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The views expressed within this article are those of the authors and do not represent the views of the Finance Student's Association. All images and references in this article are for fair and educational purposes only. The content in this article is not intended as legal, financial or investment advice and should not be construed or relied on as such.