In the past 6 months, Australia has seen a proliferation of online lenders emerge. After the roaring successes of overseas players like Lending Club and Prosper, it would seem the somewhat sleepier Australian Fintech market has finally kicked into gear in this particular sector.

At last count approximately 30 online lending outfits were pitching their wares to small business. Moula, Spotcap and Prospa heading up the charge locally, while American player OnDeck has also made an entrance, partnering up with Australia’s biggest accounting software provider MYOB in order to fast track loans and improve credit assessments.

So far, Prospa looks to be the strongest contender, and is the only player in the local market to have securitised its loan book. The company also looks to be making inroads with establishing much needed distribution channels. In November last year it quietly announced it was testing a referral program with Westpac , one of Australia’s largest banks. Prior to this, in June of last year, it also locked down a partnership with mortgage broker AFG. Both channels could potentially provide Prospa with access to thousands of highly qualified prospective borrowers.

SME lending in Australia is a huge opportunity. According to Macquarie Research, $60 billion in unmet lending demand is just waiting to be plugged. Yet many of these lenders, Prospa included, have been around for a few years. What’s stopping the sector from true lift off?

Reviewing each of their websites, Prospa’s included, one worrying factor is immediately clear. An inability to differentiate one lender from another. Each promises virtually identical benefits – fast and flexible loans (coupled with mysterious APR’s). Pair this with a lack of unbiased comparative information available and soft educational content marketing about alternative finance providers, and the race handicap is clear. Firstly SME’s don’t know they exist, and secondly it’s hard to pick a winner from a field of clones.

In fact, the data backs up how this lack of differentiation is likely to be dragging on non-bank lenders balance sheets. A survey conducted by East and Partners in October of last year found that “39 percent of businesses in the Micro and SME segments could not recall a single Fintech brand,” and, “of the companies that were able to recall a Fintech business, only 61.6 percent were aware and understood what product or service that Fintech was offering.”

While time will tell if all can survive, one thing is absolutely certain – for these lenders, cost of capital is higher than the banks and risk pricing is still no walk in the park. The investor clock is ticking, and online lenders need to figure out the killer growth model before their competitors do.

In that sense, I see two opportunities in the short term for online lenders to explore.

Smarter partnerships

Prospa understand the small business market isn’t that far removed from retail banking. Mums and Dads own the local newsagent, corner coffee shop and plumbing business. The opportunities for AFG to cross-sell within the base are evident, and Prospa want’s to be considered when they do. Online lenders need to find these sorts of distribution channels to increase their ‘foot soldiers’. Until the market gets more comfortable with non-bank online lending, personal conversations are crucial to build the momentum towards a healthy direct sales model.

Lending segmentation

Specialist lenders are nothing new. Bank of Queensland Specialist, once the specialist banking arm in Australia of Investec, has carved out a healthy niche for itself as the lender of choice to the medical, dental and veterinarian market. Through a deep understanding of the costs of setting up and doing business in these professions, they are able to offer a suite of tailored financial products. Where is the hospitality, fashion or tradesperson equivalent? A strong content marketing strategy in these channels alongside a tailored online lending solution would be a route to faster traction.

Alongside this, there are probably a number of offshoot opportunities for content marketing/affiliate companies who know how drive qualified lead acquisition through nurturing programs and soft educational content. In Australia this space is nascent and fragmented.

They say the bigger the challenge, the bigger the opportunity. Lending is a huge opportunity. Building awareness and product distribution channels is an equally huge challenge. One thing is for sure, it will certainly be interesting to see how 2016 shapes up down under.