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US-based Credible was the largest tech float of 2017, and they won’t be the last as the ASX draws more local foreign talent, says FinTech Australia director Jack Quigley.

What does Credible do and how does it disrupt the finance industry?

In the largest tech IPO in Australia in 2017, Credible Labs (ASX:CRD) listed on the Australian Stock Exchange on December 8, raising $50m at a market cap of approximately $300m.

CRD share movement since listing on December 8. Source: Investing.com

Credible, founded in 2012, has been a stealth success story in the US, initially offering Student Loans and more recently Personal Loans and Credit Cards to US consumers. The company employs a marketplace model, where qualified borrowers can select a funding offer from multiple vetted lenders. If a financing offer is accepted, the provider pays a fee or commission to Credible.

It’s fantastic to see an Australian Fintech success story like this, but aside from pure patriotism, I like Credible as an investment proposition for a number of fundamental reasons.

What is behind a Silicon Valley start-up listing on the ASX?

This is somewhat of a coup for the Australian market which currently has a chronic lack of high growth tech stocks, which has led to significant underperformance of the market (when compared to other major stock markets) since the GFC.

Credible cited a number of reasons to opt for an Australian (rather than US) listing, including lower listing costs, lesser ongoing compliance requirements, and the growing sophistication of local investors in assessing and valuing high growth tech stocks.

I also think that the Credible IPO, along with similar recent successful tech listings, will open the doors for further similar listings of fast growing tech enterprises.

Additionally, this will add impetus to the pre-IPO funding markets to identify and support emerging tech businesses.

How does their product adapt to changing banking preferences?

Credible is tapping into a growing trend in the US towards online origination and transacting of financial services. This is expected to benefit Credible as increasing numbers of consumers / borrowers look for transparent, simple and immediate transaction solutions (not unlike the many Australian comparison and lead generation businesses).

We have already seen the rise of digital banks for everyday transactions and this is simply the next step. In Australia Xinja just raised $5 million for their “neobank” and are posed to launch their first mortgage product in March next year.

How does the model work and can what they use be leveraged further into other complementary applications?

Credible operates a marketplace model – somewhat like a finance broker – where it is compensated by lenders for successful leads. The beauty of this model is that Credible does not lend funds, so does not bear any loan losses, nor needs to have access to debt capital to expand.

Essentially then the key risk to Credible is an inability to grow or even a reduction in loan volume, and that risk is mitigated by having approximately 140 marketing partners – thereby diversifying this risk significantly.

The platform is technology centric, and is strongly oriented towards its customers, which is a key differentiator from many of its older competitors. Credible claim its technology is agile, scalable and adaptable, which it supports its growth ambitions.

Founder Stephen Dash is an Aussie expat who brought contacts from the US in as part of his board, do you think big credentials are a must?

It has been consistently demonstrated that a large part of the success of a start-up or high growth venture is attributable to the quality of its founder(s) and team.

Ron Suber, the Chairman, is highly credentialed and highly experienced in the fintech world, among other things a former President at Prosper Marketplace, and Managing Director at Wells Fargo Securities. Globally Ron is referred to as the “God Father of FinTech”. I recently spent time with Ron at FinTech Australia’s Collab Collide Festival in Melbourne and I can say with confidence that this title is well deserved.

Stephen Dash, the CEO and Founder, has been leading the business from inception, and prior to that had direct investment experience with M.H Carnegie & Co, one of the stalwarts of the Australian venture investment scene. He also brought along Dean Dorrell, also formerly of M.H Carnegie & Co and who co-founded Carthona Capital in 2014 – what has since become one of Australia’s leading early stage venture capital companies with over $200m of funds under management.

Jack Quigley is the Founder and Managing Director of CrowdfundUP, Australia’s leading real estate crowdfunding platform, and Founding Director of FinTech Australia, Australia’s industry FinTech body. Jack is also a member of ASIC’s Digital Finance Advisory Committee.

Jack has played an influential role in shaping the Australian crowdfunding and alternative finance industry over the past few years and is at the forefront of discussions with the Australian Government championing the benefits of innovation on the Australian economy. With extensive experience in both Australian and China, Jack has become a leader in the crowdfunding space globally, regularly speaking at events and conferences around the world.