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The Lending Revolution:
Building World-Class Digital Lending Experiences in Southeast Asia

Allison Karavos
June 2, 2023

Digital lending has the potential to revolutionize financial inclusion in Asia’s emerging economies. For individuals and small businesses in the region, accessing credit has traditionally been a daunting, time-consuming process, often resulting in high rejection rates and limited options. 

However, with the arrival of digital lending, the process has become faster, more efficient, and more accessible, offering a world of opportunities for those previously excluded from formal financial systems. Digital lending offers faster decision-making, better risk assessment, and more customized product features. By accessing real-time data, lenders can make faster credit decisions, which leads to faster disbursements and better customer experiences. 

Aditya Chintawar is the Chief Product Officer at KoinWorks, an SME-focused neobank that helps customers build credit scores to solve the problem of accessing credit in Indonesia. With a population of over 270 million people that are largely unbanked or underbanked, a report by McKinsey & Company estimates that the economic impact of digitization would be a $150 billion or 10% of GDP growth. By leveraging digital platforms and technologies, lenders can reach a wider customer base, which can help drive economic growth and development. Aditya recently spoke to Provenir’s General Manager for APAC, Bharath Vellore about their experience building world-class digital lending experiences tailored to this market. Check out some of the key takeaways from the discussion. 

Digitization vs. Automation: Understand the Difference and the Path to Follow

Digitization and automation are not the same! Step one to digital lending is effective digitization: the process of transforming analog or manual processes in lending into digital ones. This involves the use of digital technologies such as Optical Character Recognition (OCR), data analytics, machine learning algorithms, and digital platforms to improve operational efficiency, enhance customer experiences, and expand reach to underserved segments of the population. By taking a written statement on a new lender, digitizing it and inserting it into your data lake, you enrich the quality of your models and open the doors for new customers with no previous credit histories. Digitization allows lenders to access data in real time to make faster credit decisions, and provide more customized and personalized products to their customers. Digitization is a key factor in transforming the lending industry and enabling lenders to compete in today’s rapidly evolving market and provide more customized products to their customers.

Once a process has been digitized effectively, it can then be automated. Manual to digital to automation is the path to follow, and it is essential to understand what is being digitized to ensure it is effective. Digitalization unlocks additional data points, making it easier to build better products, perform better risk assessments, and provide better customer experiences. Understanding lending behavior through key data points is critical, and the development of any digital lending product should take this into account. In terms of client experience, the customer response to digitalization has been great, and certain forms of face-to-face interaction can still be maintained, such as voice KYC or video calls.

Balancing Inward and Outward Focus

To digitize effectively and launch new digital products, lenders must balance inward and outward focus. Inward focus requires proper digitalization – adapting operational processes such as underwriting so they can be done by computer systems – in order to reduce friction, make credit underwriting faster, and provide insights into risk assessments. However, properly executed digitization must also happen on the operational level for the availability of services to be possible. A step-by-step approach ensures that each aspect of the process is able to handle the previous load, ultimately ensuring that the availability of service is on-demand, 24×7. Many digital lending products are launched with an outward focus on great front-ends designed for great user experiences. Koinworks operates in a setting where the average smartphone has 4GB of RAM and 64GB of storage. To be relevant to users, the app needs to have a small footprint and be easy to use. The app also offers a dedicated support team to help users with their loan applications and other needs. But if the back-end cannot function up to speed, it will lead to client frustration. Providing ongoing analysis of user behavior can help identify cross-selling opportunities and increase loan limits for existing customers. So, when it comes to inward or outward development focus, it’s an issue of building an agile, end-to-end infrastructure, to strike a balance between the two and launch as quickly as possible. 

The Challenges of Retention in Digital Lending

Retention in digital lending is challenging. Strategies for reducing rejection and anxiety include defining trust and critical parameters with the business to avoid fraud and risk, and maintaining effective communication with the client. Lending is a complicated business, and testing underwriting systems takes time, so running multiple programs on smaller budgets to identify which product works is essential for each type of customer is essential. Additionally, the focus should be on creating a seamless customer experience, reducing friction, and taking into account customers’ digital footprint.

The lack of trust in emerging economies where financial inclusion plays a huge role, has a significant impact on decision-making and strategy. Building trust and infrastructure is essential for the success of digital lending in these markets. Scalability and agility are also important, as they allow lenders to adjust their offerings to meet changing customer needs. Fintechs should focus on agility when building product features to respond to changing market needs quickly. Finally, being open to new ideas and defining trust and infrastructure will help fintechs succeed in a rapidly evolving environment. That’s why digital lending becomes, not just a nice-to-have, but a must-have in order to compete on quality and time-to-market.

“The goal is to create a virtuous cycle. Better data leads to better risk assessment, which leads to better products and experiences. All of which, in turn, lead to better data.”

– Aditya Chintawar, Chief Product Officer at KoinWorks

Digital lending is transforming the lending industry in Southeast Asia and around the world. By leveraging digital technologies and data, lenders can improve their operational efficiency, enhance customer experiences, and expand their reach to underserved segments of the population. However, to succeed in these markets, lenders must balance inward and outward focus, understand the difference between digitalization and automation, address challenges related to retention, and build trust and infrastructure.

Watch the full fireside chat with Bharath and Aditya to learn more.

Discover how better data can help your digitization journey.


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