B2B Payments

Australia’s Bank/Alt-Lender Hybrid


Australia’s alternative lending industry, like others on the planet, is in the midst of a growth spurt. Foreign players are entering the market, while local innovators are launching operations, and at the moment, it’s a bit of a free-for-all.

Many of these players are entering an industry of small business lending at a time when major financial institutions are taking a step back from financing SMEs amid tighter regulations and more conservative risk mitigation efforts. That means for some alternative small business lending platforms, they’re working in direct competition with the big league players.

But Australian payments and FinTech firm Tyro seems to be in a league of its own. The company secured a banking license earlier this year, a feat its founder and CEO, Jost Stollmann, told reporters was achieved with SMEs fixed in the company’s line of vision.

That license puts Tyro in a unique position in the industry — an alternative FinServ player but also a bank.

[bctt tweet=”Tyro is in a unique position — an alternative FinServ player but also a bank.”]

Fresh off of a multimillion dollar funding round, PYMNTS spoke with Stollmann to learn more about the nation’s current small business financing market and how Tyro will navigate as an official bank looking to bring small business owners financial services only big corporations could once access.

According to Stollmann, Tyro is pioneering “the next generation” of SME banking with its license in hand. The company, he said, is piloting a new transaction and deposit account solution that uses the cloud to offer small businesses tools rarely seen by traditional banks.

“Everything between the bank, business system and accounting software will be automated,” he explained. “The new banking solution will optimize the use of money to earn interest automatically at all times, giving full control to the business owner, just as the treasury departments of large corporations do.”

By integrating Tyro’s POS data into its banking solutions, Stollmann said small business owners can obtain a more efficient way to manage their money and access a loan.

Stollmann used words like “less red tape” and “easier” in describing the firm’s approach to the small business lending process, adding that financing products will be issued based on a company’s cash flow, its financial health via the data streaming in from Tyro’s POS and accounting tools already in use by businesses.

Plus, he added, as a cloud-based solution, Tyro can connect SME owners to their bank accounts via mobile, allowing them to approve and reconcile payments with their mobile device.

As Australia’s first FinTech player to receive a banking license from the Australian Prudential Regulatory Authority, Tyro is now positioned within the banking community. While that means it will act as a competitor, Stollmann explained that in the nation’s current climate, there isn’t much competition when it comes to servicing small business customers.

“In Australia, the banks do not offer cash flow-based lending to SMEs,” he said, adding that while banks around the globe have retreated from small business customers, in Australia, “there is nothing for them to retreat from.” This means there is a multibillion dollar funding gap for SMEs, which has led to a flood of new market entrants.

Stollman believes that in the coming years, the successful alternative lenders will be the ones working alongside banks to provide a front-end solution for small business clients or the ones that compete directly with banks by offering alternative financing.

“Obviously, there will be a first wave of consolidation as the gap between leaders and followers widens,” the CEO said of the alt-lending sector, “and a second wave when the first significant downturn separates the providers with strong risk management from the others.”

As for how Tyro fits into this environment, Stollmann explained the company as one “building an SME bank that competes directly with the dominant Australian banks.”

“Alternative lenders are partners of ours in the same ecosystem trying to make inroads by offering awesome alternatives to the current cumbersome, broken and expensive traditional bank processes and products,” he added.


Featured PYMNTS Study: 

With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.