Online finance now 'due for consolidation'

And despite all the frenzy and buzz the concept of "Internet finance" has generated in China, he said, various forms of "Internet finance" don't themselves add much value. That's true of P2P operations, third-party payments or online money funds. They're just "new incarnations" of what banks have been doing for a long time. 

Era of 4G to bring changes to China

Time to show more online interest

Internet finance, at its essence, is still about moving money from the capital markets through intermediaries to borrowers. What is new, he said, is that Internet finance firms can aggregate a large amount of information from transactions in particular platforms.

This is true of Alibaba Group Holding Ltd's lending operations, where its dominance of e-commerce in China enables its payment system, Alipay, to generate huge volumes of transaction and payment data from the companies and individuals that use it.

By mining this proprietary data, Alipay can assess the risk and creditworthiness of would-be borrowers and therefore price loans to them.

This in turn allows it to overcome one of the most important barriers that keep SMEs from getting the access to finance they need - the lack of reliable credit information on potential SME borrowers in many parts of the world.

Compared with traditional banks, Schizas said, intermediation via the Internet makes transaction and due diligence cheaper, and it also makes it easier for borrowers to diversify their portfolios because of the low transaction cost.

But the ACCA is not convinced that this amounts to a disruptive innovation in the business model. It cites evidence from the United Kingdom, where online lenders mostly target mainstream business borrowers, which the banks were already targeting.

Disruption will begin in earnest when entirely new types of information are part of investment decisions, making money accessible to businesses that have had little access to funding.

Three P2P pioneers take stock at 30

Internet finance is in, but is banking out?