The financial technology (fintech) industry has not even scratched the surface of opportunities across Southeast Asia, says Geoff Prentice, co-founder of Hong Kong-based micro-lending startup Oriente.
In 2017, Prentice, a Skype co-founder and its former chief strategy officer, partnered with Hubert Tai, a founder of Ping An-backed online lending and wealth management platform Lufax, and investor Lawrence Chu to form a company that offers digital credit and financial products in Southeast Asia.
In an interview with EJ Insight, Prentice said one of the lessons he learned from co-founding Skype is that “it is important to have a strong social purpose”.
While Skype revolutionized communications between family members and friends no matter where they are, “at Oriente, we are deeply committed to using technology to unlock financial access and ignite economic opportunity for more people”.
The fintech startup launched its first two ventures in the Philippines and Indonesia – Cashalo and Finmas respectively. Both are lending mobile applications that provide credit services for unbanked and underserved consumers, as well as micro small and medium enterprises (MSMEs), using a mixture of online and offline channels.
The service allows consumers to apply for financing solutions and receive results within minutes via its mobile-based online platform, without the need for complicated application and documentation procedures. It also uses offline touch points to reach customers, deploying salespeople in shopping malls and stores to help them avail themselves of the service.
Oriente offers competitive interest rates, Prentice said. One of its products, “Cashacart”, allows customers to apply for installment payments through the mobile app when shopping in physical stores and pay the items on credit. The monthly interest rate ranges from 0 to 4 percent, a fraction of what Southeast Asian microlenders offer, which can go as high as 22 percent.
Oriente’s ventures have seen a boom in business, with Cashalo and Finmas growing at a faster rate than either Skype or Lufax did in the first six months of launch. In less than nine months, Oriente’s active user base has leaped to over 1.5 million, and it has now a retail merchant partner network of over 350 stores and growing.
Prentice said the startup is laser-focused on the markets they are in, and is on track to enter Vietnam later this year.
The market has seen the digital economy in Southeast Asia growing rapidly, with homegrown players like Grab, Go-Jek, and other peer-to-peer microlenders, along with foreign giants like Ant Financial and Tencent, competing in the local financial services arena.
Amid the intensifying competition, Prentice believes Southeast Asia is not going to be a “winner-takes-all” market, unlike in China and India, where a few giants are dominating the market.
“Unlike India or China, Southeast Asia is made up of seven to eight individual countries or markets, each with its own distinct market requirements, regulations, language, etc.,” he explained.
Prince believes the opportunity in Southeast Asia is vast and the market will see different companies addressing the different challenges and opportunities across the financial services industry.
He stressed that his company has no intention of spending on money incentives to battle for market share.
On how its services differ from those offered by competitors, Prentice said one of its advantages is that the startup is “extremely well-funded”.
It has raised US$105 million in its initial funding round. In addition, it has local partners who share its vision, like JG Summit Holdings, Sinar Mas Group, and Berjaya, which participated in the startup’s funding round in November.
Malaysia’s Berjaya is in property, consumer marketing and more; JG Summit operates retail, banking and aviation, among other businesses, in the Philippines; and Indonesia’s Sinar Mas covers financial services, telecommunications and more.
These partners are playing highly strategic roles in Oriente’s expansion in the local markets.
But the business model of Oriente is not that simple. While it is easy to lend out the money to individuals or businesses, it is very hard to ensure borrowers pay back the loans on time, in full, with the interest charges.
Instead of rapidly growing their loan book, Prentice said the core business should be all about risk management, as “one of the most significant challenges in SEA is fraud”.
On mitigating risk by effectively reducing fraud, he said it is leveraging artificial intelligence and machine learning technology to develop anti-fraud algorithms, which are designed to determine an applicant’s creditworthiness within minutes.
Also, Oriente has local teams who run the more traditional “know-your-customer” activities through offline reference checks. “You cannot have a system that relies solely on technology to fight fraud in the region,” Prentice said.
Huge portions of the population in Southeast Asia do not have bank accounts and have not obtained bank credit before.
As such, the startup is bridging the credit gap by building “financial identities” for the under-banked and underserved customers, using both traditional and non-traditional data.
Oriente’s credit assessment solution and risk engines analyze a wide set of customers’ data beyond that which is traditionally used in evaluating personal credit applications, such as social connections, location information, basic phone usage, merchant transactions, app usage, and personal identifiers. “These signals serve as a proxy for traditional financial data, helping us verify identity and assess creditworthiness within minutes.”
In a region with over 650 million people, where over 70 percent are still unbanked and an even larger number underserved, Oriente aims to create financial identities for millions of “credit-invisible” consumers.
They are investing to build new financial services infrastructure and bring the huge population into the formal economy, hoping to open economic opportunities for them.
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