Oriente, a Hong Kong-based fintech providing data-driven consumer finance in Southeast Asia, is now rolling out in Indonesia after having launched in the Philippines, with Vietnam next, says Geoffrey Prentice, co-founder and head global business strategy.
“We are taking an Amazon approach,” Prentice said. “We are building a mass market, driving interest rates down to the point where we can be marginally profitable, and then we expand the pie.”
This is not your usual fintech bootstrapping itself from a subsidized office in Cyberport. Its Central offices are appointed like an investment bank’s.
Prentice is a Silicon Valley veteran: he joined Skype’s Swedish and Estonian founders, serving as chief strategy officer in 2002. There he led the company’s global expansion out of Scandinavia, and then oversaw its sale to eBay in 2005 for $2.6 billion (Microsoft then bought it in 2011 for $8.5 billion). He also set up and ran Atomico, a European venture capital firm.
From free calls to finclusion
There is a thread between Skype and Prentice’s launching Oriente last year, with co-founders Hubert Tai Sho-Hsien (previously CTO and a founding member of Lufax, as well as CTO at Chinese B2C e-commerce company dangdang.com) and Lawrence Chu, founder of BlackPine Group (an early investor in Lufax and, more recently, backer of Hong Kong blockchain players including Kenetic Capital and Venture Smart).
Skype’s biggest growth in the early 2000s came from Asia, where it partnered with Tom.com, a Li Ka-Shing internet investment vehicle. “That’s why Meg [Whitman, then-CEO at eBay] wanted to buy Skype: to get into China,” Prentice told DigFin.
We're taking an Amazon approach
It was the sale that brought Prentice into collaboration with Hubert Tai, who was then the head engineer at eBay, before becoming CTO and COO at Lufax.
The idea for Oriente came out of Prentice’s years at Atomico, where he began comparing the success rate of venture capital firms against Ping An, the parent of Lufax. About 15% of Atomico’s portfolio companies were successful, versus 75% of Ping An’s. Prentice decided it came down to Ping An recruiting the best people, accessing plenty of capital – and exploiting a captive user base.
He looked at how that combination could be repeated in Southeast Asia, where markets are primarily cash-based and large populations are badly served by financial institutions, or are not served at all – yet where populations are mobile-savvy.
He set up Oriente, with Black Pine’s financial backing (Chu serves as CFO) and after convincing Tai to build the platform. “I dragged him out of retirement,” Prentice said. Many of the company’s engineers, based in Shanghai, are former Lufax, eBay or dangdang.com people.
So the group had capital and it had experienced technologists who had built financial-services fintechs that scaled. But it didn’t have the captive audiences. So it partnered with local tycoon-led conglomerates: JG Summit Group in the Philippines, run by Lance Gokongwei, and Sinar Mas in Indonesia, under the Widjaja family. These are organizations that own airlines, retailers, utilities, industrial companies, and other interests.
“We wanted to bring a Lufax experience to these markets by leveraging these partners,” Prentice said.
Oriente’s local Philippine arm, Cashalo, launched in May providing cash loans and credit to consumers of various JG Summit operations, online and offline. It acquired 1,000 customers in its first month but is now onboarding 30,000 new borrowers per month, via 250 stores where people are encouraged to download Cashalo’s app. “The [first six months’] growth rate is better than Lufax,” Prentice said.
Now the Indonesia business, called Finmas, is going live, and Vietnam will be next, although Prentice declined to discuss partners there.
Prentice says growth comes from using technology and partner customers to provide the lowest possible interest rates on loans. He expects the business to scale quickly, doubling its current employee base of 750 people across the region.
Oriente wants to be regulated in its markets: it is registered as a lending company with Indonesia’s securities regulator, OJK, and is in a Bangko Sentral ng Pilipinas sandbox.
The business is not competing with banks; it is attacking segments that banks ignore. Its treasury relies on banks for funding, as it has no deposit base of its own. (Voon San Lai is Oriente’s head of asset management, working with banks to support the company’s balance sheet; he is formerly deputy CEO and head of robo-advisory at Hong Kong fund house Value Partners Group.)
We wanted to bring a Lufax experience to these markets
But how does Oriente repeat a Ping An-like experience in Southeast Asian countries, where there is far less data available?
Prentice says it’s a challenge. In the Philippines, Cashalo has started by offering a rewards program to an upper tier of around 5 million borrowers. “The more time we spend with users, the more data we get,” Prentice said. Oriente also buys data from third parties, which he declined to name, and relies on offline channels to get new borrowers to download its app.
Oriente uses a range of technologies, including facial recognition, machine learning, to develop credit risk assessments that is based on user behavior rather than paper-based financial records. Close to 90% of Filipinos have no access to a credit bureau, for example.
He says the biggest difference between Southeast Asia and China is what the data is meant to avoid: in China, the platform risk is too many loans go bust; in Indonesia and the Philippines, the risk is fraudulent borrowers. A large portion of Oriente’s team is focused on cleaning data and being picky about admitting borrowers onto the platform. The company is opposed to practices such as writing off someone’s first loan as a cost of doing business.
Customer data is easier to acquire in Vietnam, but it’s expensive, he added.
Oriente has partnered with old-school conglomerates. If it’s not competing with banks, what about startups – the Grabs, Lazadas and GoJeks of the region?
Prentice says he hopes to find ways to work with such groups. “They have tons of high-frequency data, but we have scale and expertise,” he said.
What about extending the tech stack, or broadening from the in-house tech built by Hubert Tai? Prentice says Oriente has been exploring pilots with Lawrence Chu’s other investee companies, but that these are not core to Oriente’s business.
Is there a risk that frictionless lending can lead to people simply spending money they don’t have? After all, financial literacy rates in Indonesia, the Philippines and Vietnam rank lowly in stats such as Standard & Poor’s Global Financial Literacy Index.
Prentice dismisses the concern because the tech makes pricing and products transparent. “If people know you’re gouging them,” he said, “it’ll boomerang on you.”