Banking — plugging the 'unbankable' loopholes

To tackle the acute gap created by the low bank penetration rate in parts of Southeast Asia, where a huge number of cash-based individuals are unable to access credit and other financial facilities, Hong Kong-based startup Oriente has stepped in with the panacea.

Founded by Geoffrey Prentice last year, the company is eyeing the Southeast-Asian market, offering data and technology-driven financial services to millions of unbanked, micro-, small- and medium-sized enterprises through online and offline access.

Prentice established Skype in 2002 — one of the first foreign telecommunication software companies to tap into the Chinese mainland market. It was sold to California-based internet titan eBay for $3.1 billion in 2005 on the strength of its years of presence in China.

"We (Skype) had focused on Asia as our growth driver and that's why I decided to come to Asia then," recalled Prentice.

He later went to London to join Atomico as a funding partner in a technology investment venture. "But, I wanted to do my own thing and returned to Asia," he said.

Meeting up with Hubert Tai, a founding member of Lu.com — China's leading online investment and financing marketplace run by Shanghai Lujiazui International Financial Asset Exchange (Lufax) — during the fundraising exercise, Prentice invited him and Lawrence Chu, an early investor in Lufax, to start up Oriente.

With years of exposure in Asia, Prentice realized that in Southeast Asia, most economies are primarily cash-based and even though they're gradually looking to mobile payments, there're still a large number of individuals and small businesses that are unable to get a full set of financial services.

Prentice's goal is to get rid of this pain point and offer alternative solutions.

"Hubert is an engineer, a super brilliant guy, a tech person. And I told him we need to build it up across Southeast Asia," said Prentice. Tai ultimately became Oriente's chief executive officer and brought several people working at Lufax into the team.

"We have the best artificial intelligence, machine learning technology. And our core technology team is the one that built up Lufax," Prentice said. Oriente's 200-strong tech team is based at its Shanghai office.

"More than a decade ago when I was with Skype and had engineers based in Estonia, I had thought of exporting technology to China but now, I'm exporting technology from China," said Prentice.

Oriente uses technologies like AI, machine learning, data science and credit-scoring to provide online peer-to-peer lending at possibly low-interest rates and other tailored financial services.

"Some lenders are just transferring the offline strategy to online, but that doesn't work," said Prentice. "The most important part is infrastructure. When you're looking at developed markets to invest, you can see all the stuff is already there. But, here in Southeast Asia, the infrastructure is broken and we're literally building the infrastructure," he explained.

Within two years, Oriente's headcount has rolled on from dozens to the current 1,300 plus, with two joint ventures in the Philippines and Indonesia.

Cashalo — a mobile lending platform set up by Oriente and a subsidiary of JG Summit Holdings, one of the Philippines' largest conglomerates — enables Filipinos to secure banking credits they need for opening up small businesses, or shopping, medical expenses and tuition expenses.

Oriente also provides offline lending solutions to local customers, with staff manning brick-and-mortar stores to help clients learn about the company's financial services, and offer related information.

Cashalo has stepped up its physical presence in the Philippines from a couple of stores three months ago to 250 outlets at present, plus seven different department stores with some 850 staff. "We need our own staff to do sales, finance customers purchases, and teach them how to use the services," said Prentice.

Providing digital P2P lending services in Southeast Asia, Oriente highlights online fraud as a major problem to be dealt with. "Many people focus on risk management, that's surely important but it's just a small part," he said. "The system couldn't sort out who is good or who is bad, and to work it out is our whole point."

Prentice introduced "Know Your Customer" — the other part of infrastructure Oriente focuses on. "It requires lots of staff to get to know our customers' profiles as most of the individuals are not covered in the credit system," he said.

It takes just four phone calls in eight minutes to applicants' co-workers and other information provided by the applicants to confirm their identities. "All we're doing is to make sure you are a real person," Prentice said.

"Our goal is to keep driving interest rates down. By pushing rates down, people can become our long-term customers and use the credits positively," he said.

Earlier last month, Cashalo launched Cashacart — a basket financing solution that allows clients to borrow up to 19, 999 Philippine pesos ($379) to purchase items from Cashalo's 250 retail partners. It aims to reach millions of customers by next year.

In Indonesia, Oriente has joined forces with the Indonesian Financial Services Authority to build up a P2P lending platform called PT Oriente Mas Sejahtera (Finmas). The joint venture aims to provide financial inclusion for all Indonesians through its mobile app.

"It's not about if you have the best technology but more about if you have the whole tier system. You need both operation stores and technologies to go together," Prentice said.

According to Oriente, Cashalo is seeing faster customer growth than Skype and Lufax did in their first six months of operation.

Prentice sees their biggest competitors as big family offices that offer loans to each other instead of the banks. "Actually, the banks don't want to touch these groups as it takes a lot effort and they don't offer such lending to these individuals and small business," he explained.

Currently, Oriente has seven offices across Asia — in Shanghai, Taipei, Hong Kong, Jakarta, Manila, Ho Chi Minh City and Singapore.

"We have 30 to 40 people in our Hong Kong office doing a lot of work on corporate and business development," said Prentice. "After all, you can't deny Hong Kong's role as a financial hub."

Last month, Oriente announced a $105-million initial fundraising seen as one of the largest initial funding rounds in fintech globally.

The tech startup has set its sights on Vietnam, where there's a huge demand for loans offering affordable interest rates.

Contact the writer at pamela@chinadailyhk.com