The COVID-19 pandemic has been hitting Southeast Asian consumer-lending fintechs hard, with Indonesian peer-to-peer lender Akalaku – backed by Ant Financial among others – reportedly banished from European platforms over unpaid loans.
Oriente has also made headlines for cutting 20% of its team, but co-founder Geoffrey Prentice says the company’s approach of building the tech before chasing lots of users is paying off. It is attracting partners eager to get exposure to Oriente’s users, with insurer Allianz in talks to join the platform in the Philippines, he says.
Oriente operates consumer installment lending in the Philippines, Indonesia and Vietnam. Its biggest market is the Philippines, where it is partnered with JG Summit, a conglomerate owned by the Gokongwei family that has fingers in many Filipino pies: 85% of people there buy something from the group every month across a swathe of retail franchises, says Prentice.
Although the fintech’s loan book has deteriorated, Prentice says it is small and liquid enough to survive the lockdown spurred by the pandemic. He would not detail the rise in non-performing loans, just saying, “It’s gotten worse, but not way worse.”
The firm lends consumers installment-type loans, similar to AfterPay in Australia, but on a smaller and shorter-term basis. Its average loan term is 2.5 months, and the overall book is below $50 million; the company relies on heavy churn rather than adding lots of borrowers.
“Too many people equate the size of a loan book to your success,” Prentice said from his office in Hong Kong. “How much money you can give to people is not a good business metric.”
Acquiring data in cash economies
Oriente raised $50 million in November to continue investing in its infrastructure. Its commercial goal is to please the retailers it partners with by helping them grow sales. That leads to increased interaction with their customers. “You have to make money for the retailers first,” Prentice said.
The Philippines, Indonesia and Vietnam are largely cash-based economies, which means merchants have no information about the people buying their goods. Oriente initially tried to get franchise outlets to integrate its app with their point-of-sale machines, which failed.
How much money you can give to people is not a good business metricGeoff Prentice, Oriente
Now its salesforce convinces store managers to integrate with Oriente’s mobile app, which offers consumers loans to pay for purchase in installments – usually for non-essential goods like clothing. Oriente then begins to build its own credit scores on those individuals, while creating a lead-generation engine for merchants.
Prentice claims the fintech has helped stores in the Philippines increase sales by 20% to 30% this year. That opens the door to doing more for merchants and delve more deeply into their operations. Oriente gets a spread of about 6% on those installment loans, which provides most of its revenue, but the longer-term goal is to provide a far broader suite of finance.
This is where Prentice says the comparison to AfterPay or Sweden’s Klarna, mobile apps for installment consumer loans, lose relevance. In developed countries, those apps sit on top of users’ existing credit or debit cards. In emerging markets, people are unlikely to carry plastic.
“We can go wider,” Prentice said, noting that in developed countries, fintechs can only target narrowly defined verticals, whereas in emerging markets there is scope to go after many types of consumers, with a mix of offline and online services for both cash and credit.
Partnering with Allianz
This is where the deal with Allianz PNB, the insurer’s Philippines arm, comes into play.
Prentice says the lack of credit bureaus or other traditional forms of information also make it difficult for insurance companies to price policies. The credit models that Oriente is building are not apple-to-apple comparisons, but close enough to give an insurer data to identify customers that might be able to purchase various types of cover – starting with life insurance on the back of cash loans.
This business is not about customer acquistionGeoff Prentice, Oriente
“This market doesn’t exist,” Prentice said because even in the glitzy malls of wealthy Makati in Manila’s business center, more than 50% of shoppers settle with cash. The picture in smaller cities or towns is even more skewed to cash. In the stores where Oriente is present, it is now the second biggest settlement channel, behind cash but ahead of credit-card networks.
Allianz’s regional spokesman did not confirm or deny the relationship.
Oriente is also in talks with companies – payments providers or financial institutions – to provide the back end of settlements, from collection to KYC to credit engines.
“We invested in infrastructure because this business is not about customer acquisition,” Prentice said. “Those fintechs that focused on growing a big customer base are now struggling to collect.”