FinAccel Takes on Southeast Asian Lending Industry With Simple Online Credit Service – TechCrunch

Credit card penetration is one such problem that is not really a “problem” in the West. In the United States only, 232 million adults have at least one credit card, 18% of consumers nationwide have two or three cards.

This high level of credit adoption is one of the factors that has helped e-commerce take off in the West. Or, to put it another way, the lack of credit cards in emerging markets as is one of the main hurdles facing e-commerce businesses. And that’s a huge problem. Lazada, for example, is Southeast Asia’s most funded e-commerce company, but it ran out of money before Alibaba injected $ 1 billion into its business. The fact that countries like Indonesia have less than 10% of credit card owners is an important factor, as a recent report from Google pointed out.

The solutions so far have been wire transfers, which are long and painful, and cash on delivery, the idea that you are literally paying for a product in cash when it is delivered to your door. This solves the problem that most of Southeast Asia’s combined 600 million people do not have a credit card, but it poses new challenges: increased rates of return and a higher potential for payment. fraud or loss of money in transit.

A number of companies believe that technology can bridge the gap, using processes like virtual credit cards or over-the-counter payments. FinAccel is a new company that offers a different approach: enabling a line of credit for online purchases.

The company is based in Jakarta, Indonesia, and essentially acts as a layer between its credit card and loan company partners and consumers shopping online. Launched last year by Akshay Garg, who founded ad technology company Komli, former McKinsey consultant Umang Rustagi and Alie Tan, formerly a member of a number of startups, the company raised a non disclosed, which TechCrunch estimates to be over $ 1 million. , led by Jungle Ventures to begin with.

Garg told TechCrunch in an interview that the idea is to disrupt the credit industry by allowing consumers to reap the rewards of a model that is suitable for today’s digital age. The FinAccel product – Kredivo – is designed to install at the point of sale like Visa, but allows customers to pay with one click and make refunds directly to FinAccel.

Initially living in Indonesia only, customers have 30 days to repay the amount at no additional cost, but the startup plans to introduce credit card-like repayment plans soon. This would be priced at 41.75% APR over a period of more than six months, which Garg said is up to a third cheaper than “almost any consumer finance company in the market” and comparable to credit card holders.

“You could say it’s high, but the cost of capital here is high,” he added. “We’re essentially putting virtual credit into the hands of five to 10 million people over the next five years.”

“We want to go strong against the consumer credit companies,” Garg said. “There is an insane amount of crap marketing in the industry today. “

The goal, he explained, is more than just beating existing financial firms, as FinAccel wants to unlock new opportunities for consumer spending, especially in the e-commerce space.

Like Alibaba’s micro-lending services in China, Kredivon is expected to make near real-time decisions on loan applications. The service uses over 1,800 data points to assess a claimant’s creditworthiness in two minutes. Beyond expected information such as salary and job information, Garg said other variables were taken into account, including social media information from sources such as Facebook, Twitter and Instagram, between others.

Garg explained that interactions on Facebook posts can indicate how integrated a person is in their community and in society at large. But this is far from the only decisive factor.

“Most people who are more integrated into society tend to be trustworthy, this is not the only determining variable among 1,500 to 1,800 but an illustrious point. Also, for example, if you tweet about a car it says a lot about you – if you buy a car in Jakarta you are definitely making over $ 1,000 / $ 2,000 per month, ”he said. .

Other less expected metrics, including the type of apps a candidate has on their phone – the Financial Times and the Economist can be indicators of high social status, Garg suggested – while call logs ( those who call the most in emerging markets tend to be wealthier and not on prepaid accounts), environmental data and device and app history on Android devices are also factors.

FinAccel is starting up in Indonesia, but intends to have a presence in the six major countries in Southeast Asia with expansion likely to begin next year starting with Thailand, Garg said.

“We are launching in Indonesia because it is our main market, because it is difficult to have a large company in South East Asia if you are not present in Indonesia, and in addition the problems are the more thorny here.

Our point of view is that we are solving the most difficult problem in the market right now, once we get a foothold here the plan is to go into other markets. “

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David A. Albanese