Launching TunaiKita for Indonesia
PT Digital Tunai Kita (DTK) is a joint venture between Wecash (Southeast Asia) Pte Ltd, JAS Kapital (JASK) and PT Kresna Usaha Kreatif (KUK) announced on 20 January 2017. We are on a mission to improve financial inclusion to the “missing middle” and beyond through mobile internet, big data and machine learning. We work closely with all layers of the lending ecosystem in Indonesia — from funding sources such as banks and multi-finance companies to loans collection companies — to improve the risk-pricing and accessibility of unsecured loans, while decreasing non-performing loans and improving collections and recovery. In providing better financial services powered by technology to Indonesia, TunaiKita strives to realise a world of better living through responsible credit.
I first visited Indonesia in August 2010, shortly after I had just started the Neoteny Labs seed fund with Joi Ito. It was part of a deal flow “pulse-taking” trip I made to the key cities in Southeast Asia as we got started. Those were early days for the tech ecosystem in Jakarta; Rama and DailySocial had not yet raised from GDP Ventures, Selina of Urbanesia was still pitching her company and Yahoo had just acquired Koprol. Still, there was an irrepressible buzz in Jakarta’s then-fledgling startup ecosystem. The team that impressed me the most was William and Leotinus from Tokopedia; I still recall grabbing coffee with them at Patissere Francois in Plaza Indonesia listening to their pitch and leaving our initial meeting impressed with their heavy focus on metrics and data. We passed on Indonesia as a market for investments from the seed fund back then, but the Tokopedia co-founders were the most grounded team I got to know during my first trip. It’s no surprise they’ve since become the e-commerce behemoth of Indonesia.
I went on to make several trips to Jakarta in the years after, and went close to getting the full Jakarta tech startup experience in 2015 and 2016 through my own company Silicon Straits when our Vietnam team built and delivered a customised display advertising and media management platform for the captive 7-Eleven Indonesia network, as well as Bluebird’s MyBB mobile app and related custom backend work. Still, I wasn’t operationally involved beyond originating and closing those business deals. Even then, Silicon Straits never had any physical presence in Jakarta as we chose to rely on Jonas as our project and account manager with Bluebird.
They say third time’s the charm; and so it is as I represented Wecash to announce the formation of TunaiKita in January 2017 in partnership with my old pals Izak Jenie and Dian Kurniadi of JAS Kapital (JASK), and Jahja Suryandy of Kresna Usaha Kreatif (KUK), that I’m finally getting my sleeves rolled up and my hands ‘dirty’ operating in Indonesia.
Founded in 2014 by George Zhi (支正春) and Li Hao (李昊), Wecash is the first private Chinese company to build a “lending robot” that helps funding sources to evaluate consumer credit worthiness, detect/prevent fraud and underwrite loans. Headquartered in Beijing, Wecash has more than 500 employees across its offices in China, United States, Brazil, Singapore and Indonesia. We’ve raised more than US$40 million from investors and acquired more than 60 million users in China over the past 3 years. In 2016, Wecash China worked with more than 30 funding sources, processing over 5 million loans with a loan book in excess of USD 2 billion. Wecash Brazil started making its first loans in January 2017, and we’re looking to launch in Indonesia as the cornerstone of our entry into Southeast Asia.
I first met George in Kerry Hotel in Beijing on a Sunday in mid-2016 at the sidelines of a fintech conference. We were introduced by Ma Ning (马宁), and hit it off immediately. I’ve always felt that fintech was one of the verticals that had superb unit economics for Southeast Asia, but hadn’t come across the right tech-meets-business model. It took several months more of mutual getting-to-know in Beijing, Singapore and Jakarta before I took up the mantle to lead Wecash's expansion into Southeast Asia, starting with the Indonesia market.
Smartphone penetration in Indonesia reached a high of 47% in 2016, with Indonesia being Asia Pacific’s third largest mobile market. Our beloved smartphone is never far from our pockets, handbags or nightstands as we go about our daily lives. The quantity and quality of data created by our activities on our one, two or *gasp* three smartphones and the online services we access through them are a far better stream of data for credit evaluation, risk modelling and loan pricing than the single-slice view provided by traditional loan application at the point of application. Our “lending robot” employs a combination of data-driven regression, rules and ranking to more effectively connect consumers to loan products from funding sources such as banks, multi-finance companies and peer-to-peer lenders. We work with more than 30 funding sources in China, and have signed with the top 5 banks in Brazil. We look forward to garnering similar interest and momentum in Indonesia.
Our joint venture’s Bahasa Indonesia name “Tunai Kita” directly translates into “Our Cash” in English, a word play on Wecash; aptly named given that deposits form the largest source of funds for banks, money that banks pay little to no interest on due to their very short terms since depositors can withdraw their funds at any time. However, the basic infrastructure of banking isn’t built on a foundation of a cash hoard that is then lent out (chicken-then-egg); it is built on loans that in turn create deposits (chicken-egg cycle), a view referred to by economists as endogenous money. Every funding source — be it a bank, multi-finance company or peer-to-peer platform — seeks to leverage upon its cost-of-funds and teams (incurring operating costs) to create, market, underwrite and issue loans (with a fraction becoming non-performing loans) to customers to generate operating profits. Here at TunaiKita, we intend to bring Wecash’s best-in-class technology platform and credit evaluation engine to bear in Indonesia; combining first principles of finance with big data and machine learning technology, over low-friction distribution channels of mobile internet and smartphones, and in so doing, gain significant efficiency from the streamlining of loans application and processing, credit evaluation, fraud detection and prevention and optimised collection and recovery. We intend to share those savings with both funding source partners and consumers, and in so doing, help Indonesian consumers achieve a better living through responsible credit.
In the first four months of 2016, consumer financing in Indonesia grew to Rp. 252 trillion (US$19.2 billion), exceeding the Rp. 247 trillion (US$18.8 billion) for all of 2015. There’s limited data available on the Internet, but what little I found corroborates with our on-ground market research, indicating that unsecured loans to consumers continue to be dominated by credit cards and illegal “gestun” or gesek tunai “swipe for cash” merchants. Traditional lenders continue to underserve unsecured loan needs of consumers for tenors of 12 months or less, leaving most consumers at the mercy of lintah darats (loan sharks).
There’s been an attempt by banks and several fintech players to address the short term unsecured cash loans segment through a combination of on-balance-sheet lending or peer-to-peer facilitation, such as Tunaiku, UangTeman, Taralite, Doctor Rupiah, Investree and Koinworks, but the actual customer journey and overall loan experience remains suboptimal. Drawing from our experiences in China and Brazil, I believe there are plenty of improvements we can deliver — from dramatically improving consumers’ access to loan products from trusted funding sources, and the ease/convenience and expediency of loan application and underwriting, to providing a more wholistic traditional-meets-digital credit evaluation that offers a proven approach against individual and group fraud — in an easy-to-use customer-first mobile app in your smartphone.
It’s been 2 months since our first announcement and we’ve been hard at work. Andry Huzain joined us in early January as our Chief Operating Officer and we’ve gone into overdrive recruitment mode, adding to our Jakarta team at a relatively fast clip. We're in the midst of setting up our office in Jakarta. We’re continuing to hire across all positions in design, product, engineering, finance, operations, customer service and collections, so do get in touch if you’re excited by our vision and want to be a part of our rocket ship. I’ve also been growing the data science team for Wecash Southeast Asia in Singapore with the help of my CTO Zeng Feng Ping (曾凤萍), welcoming PhDs with significant experience in finance, big data, modelling and machine learning. I'd also like to give an extra shout-out to Iris Chen (陈文尧) who's been an invaluable bridge between our teams in Beijing and Jakarta. It’s been a wild experience managing teams across Beijing, Singapore and Jakarta as we cut across language, cultural and geographical barriers to induce the birth of our fintech baby. We’ve been excited by the feedback and reception we’ve been getting from Indonesian banks, and look forward to launching our Android app sometime later this year.
As they always say, if you aren’t embarrassed by your first product, you’ve probably launched too late. I hope we don’t screw this up ;-).
#BisaDicicil!
Pssst! we’re hiring! Check out our openings on our job board. Don’t see a position for you? Drop us a line at info@tunaikita.com.
NB 1: OJK recently announced a new ruling for fintech companies to apply for fintech license under POJK Article 77, to better govern the relationship between Borrower (consumers), Arranger (us) and Lender (in our case, banks). We expect to be compliant in no time.
NB 2: Just a few days ago, OJK announced that it is looking to approve and provide guidance for on-balance-sheet lending sometime between April to June. If so, this will permit us to lend alongside our funding source partners. I whole-heartedly endorse this latest policy about-turn and look forward to the more level playing field that is to come.
NB 3: List of articles/publications I looked up while formulating my thoughts for this post:
- “Basel Committee on Banking Supervision | Regulatory Consistency Assessment Programme (RCAP) Assessment of Basel III risk-based capital regulations — Indonesia”, Bank for International Settlements, December 2016
- “Banking Sector Indonesia: NIM and Credit Quality Improve”, Indonesia-Investments, September 2016
- “Indonesian banks remain listless amid sluggish growth”, NUS Risk Management Institute, June 2016
- “Which Indonesian banks are ready for lower Net Interest Margin (NIM)?”, Indonesia-Investments, March 2016
- “Indonesian banking industry: challenging yet promising”, E&Y, September 2015
