PAYDAY loans up to $2000 are traditionally slapped with large fixed interest rates, high costs and exorbitant late fees, however new financial technology developed by a Sydney-based company may have the potential to alter this system for good.
Due to a newly developed reference-checking algorithm which more efficiently mines large sets of data, digital financier MoneyMe has been able to roll out a variable loan rate system, capping fees at half the legislated maximum amount.
Venture lead at PricewaterhouseCoopers, Katherine Maree Pace, says this new technology offers a more accurate loan, efficiently matching the varied circumstances of those taking on the debt.
"Credit-rating algorithms leverage personal data and behavioural economics to deliver a more sophisticated segmentation of a traditionally 'blanketed' middle market," says Pace.
"This is a fantastic plus for Australians seeking personal loans as algorithm intelligence moves us towards a future of personalised interest rates, specific to a person's unique profile."
CEO and co-founder of MoneyMe Clayton Howes says the door is opening further for the Australian small-loans market, with brimming opportunity for digital providers to offer low-cost alternatives.
"The reality is that incumbent lenders who are unable to quickly adapt to the disruption may find themselves unable to compete, and forced to exit the industry," Howes says.
"In this way, we may see a fairer and more competitive market for small-amount consumer loans in Australia, driven by superior technology."
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