Sunday 14 Jul 2024
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This article first appeared in Digital Edge, The Edge Malaysia Weekly on February 26, 2024 - March 3, 2024

It was on a futsal field that Robin Ang and Jared Lim first met, thanks to their mutual interest in the sport and common friends. It was also a meeting of two individuals with a keen eye for opportunities to disrupt a traditional industry.

“He’s pretty good at football and he has a very winning and welcoming personality. The second time [we met], he actually introduced himself with a brochure [of his company],” says Lim.

Ang is the founder of interior design firm, Wall Tailor.

“Not being very diplomatic when I saw it, I said ‘Hey, I think the copy can be improved’,” says Lim, who has a degree in computing and work experience in overseeing information technology solutions.

Lim edited the copy and sent it to Ang. This was the beginning of their relationship and they went on to start the company Loanstreet in 2010.

“We started chatting and I realised that whatever Jared was doing was very interesting. He bounced his ideas off me, on how the loan [application] process actually needs a lot of improvement. We’re not bankers but we recognise from the consumer perspective that there are a lot of things that can be done,” says Ang.

Lim had faced challenges in managing his mortgage for an apartment while dealing with financial issues plaguing his family. That experience inspired him to come up with an alternative solution — a web-based resource that can help consumers make better decisions.

“That’s my kind of attitude as an entrepreneur. When we see an opportunity, we just go for it,” says Ang.

It took two years for Lim to quit his full-time job and dedicate his time to Loanstreet, together with Ang. In 2012, Loanstreet was launched as a website that allowed consumers to compare mortgages, and in later years, other financial products such as motorcycle insurance and personal loans.

That was the time when aggregator or comparison websites, as well as financial technology (fintech) firms, were beginning to gain popularity in Malaysia. They transformed how consumers dealt with financial institutions and conducted financial transactions.

Instead of physically visiting bank branches, meeting agents or enduring lengthy wait times and phone calls, consumers could use these websites to compare the rates or prices for insurance, loans, credit cards and other financial products before making a decision. At the click of a button, they could begin the application process.

This trend also coincided with the pressure on financial institutions to digitalise their processes, which was a big ask for a traditional and tightly regulated industry.

“When we started, there was no fintech. We just executed what we ideated. We were knocking on the banks’ doors in the early days. The breakthrough occurred when a few banks agreed to work with us and let us list certain products. That’s when we had a lot more conversations and learnt from banks what they were looking for,” says Ang.

Standard Chartered Bank Malaysia and OCBC Bank Malaysia were among the first to work with Loanstreet in the early days, he recalls.

But Loanstreet was not the only aggregator website in the market then. Competition was fierce, and it was tough to find a financially sustainable revenue model. Additionally, the process of purchasing financial products still could not be done entirely online. Oftentimes, consumers had to talk to an agent or rely on manual channels to complete the process.

“People treated us like a digital media asset or advertising [platform]. It wasn’t really fully digital. The front end was digital and the lead generation was digital, but it still went to a [manual] back-end process. That was the early days, and to a certain extent, still is today. But this is where we spotted the opportunity,” says Lim.

At that point, they had to take a different path to survive. “We had to pivot. There were other aggregators or marketplaces out there burning too much money,” says Ang.

Their pitch was to help financial institutions and consumer-facing brands digitalise these processes so their services could be accessible to everyone online. In 2017, the duo absorbed Loanstreet into Finology Sdn Bhd — a name that reflects how the financial industry’s transformation can be accelerated with technology — which has a business-to-business focus, offering solutions within the realm of embedded finance.

“We think there’s a bigger opportunity to provide value to the financial industry ecosystem by helping them transition to a fully digital process. In 2017, we bought out one of the main shareholders, who still viewed us a media [platform] and we took it in a different direction,” says Lim.

They launched Loanplus, which is a digital lending solution that allows banks to provide instant loan approvals and property companies to get instant mortgage financing pre-approved by banks. It can also be used by the automotive industry and digital players. For the insurance industry, they introduced Coverplus, which is an embedded and end-to-end digital insurance purchase and claims solution.

Finology counts many of the big banks and property companies in Malaysia as its clients and partners. The list includes Alliance Bank, CIMB Bank, HSBC Bank, RHB Bank, Gamuda Land, Sunway Property and UEM Sunrise, according to its website.

This successful pivot has been recognised by the industry. Last September, the company has raised an undisclosed amount of pre-Series A funding, led by Silverlake Group and joined by venture capital fund The Hive Southeast Asia, which is a recipient of Dana Penjana Nasional, and the Malaysian Technology Development Corporation.

Winning pitch for the digital banking era

Ang and Lim’s original vision was for the process of purchasing or applying for financial products to be done completely online seamlessly. This is also the value proposition of digital banks, which have only just begun to operate in Malaysia following the granting of five licences in 2022.

GXBank, backed by Singtel, Grab and Kuok Brothers, was the first to launch its digital banking app in Malaysia last year.

The introduction of digital banks in Malaysia triggered a sense of urgency for financial institutions to digitalise, observes Lim.

“I will say that the openness now to revamp or open up to more application programming interface (API) that streamlines processes and automates decision-making is there. This is where the value proposition comes in.”

The banks face the same problem that Finology has been trying to address. How can they reach out to consumers via different platforms and make the application and approval processes easy, digital and accessible? “We’ve been staring at this problem for at least 10 years. The word today is embedded finance,” says Lim.

According to McKinsey, embedded finance refers to the placing of financial products in a non-financial customer’s experience, journey or platform. This could be by offering sales financing at appliance retailers or auto loans at dealerships.

The options are wider these days as more activities are done online. For instance, lending products can be introduced via digital wallets, shopping-cart platforms or customer loyalty apps.

The process should be seamless. This means that when a consumer decides to apply for a loan or credit card online, they will know immediately whether they are eligible and can complete the application process online instead of having to physically visit a bank branch or talk to an agent.

The “buy now, pay later” service is an example of embedded finance offered on many e-commerce websites, as are investments in unit trusts or cryptocurrencies via payment apps and e-wallets.

“The whole idea is to embed the underwriting and onboarding processes at the point where it is needed,” says Lim.

The insurance industry was among the first to adopt Finology’s solutions in 2018, when motor insurance detariffication was implemented in Malaysia. This means that insurance companies can charge premiums that correspond with consumers’ risk profile, instead of fixed rates.

Finology worked with its clients to enable consumers to get instant quotations, renew their insurance and acquire their road tax online. This has evolved into Coverplus.

“We decided to be the first to solve the problem. Only later did the banking industry come back and say, ‘hey, this is a problem we now want to address. Finology, what do you have?’” says Lim.

Finology has a patent granted for its credit decisioning automation technology, which brings together the underwriting criteria of different institutions and makes it accessible to entities like property developers and real estate agents.

This enables an individual to know whether he or she is eligible for a loan or what kind of products are suitable at the point of sale. This information is obtained, with consent, from payslips or bank statements that the individual submits, and a background check on the individual’s credit history, lawsuits and outstanding loans.

“All these factor into the credit decision. Every institution has its own measure, so we unified it and made it available,” says Lim.

The companies, meanwhile, are able to offer more personalised services to clients.

“We always believe that if you are going to purchase a house, it’s better to at least [know] your eligibility [for loans] and [what you can] afford. Once you have that ready, the buying process is better, as you know what location and type of cars [or property] to look for,” says Ang.

“On the flip side, the traditional way is for you to pay a deposit, then activate the process of applying for a loan manually. It’s a 50/50 chance [of getting the loan] until the bank calls you after a few weeks [to inform you] whether your loan is approved. So, why have these three to four weeks of anxiety or idle time when you can do it right up front?”

Going into artificial intelligence

As Finology deepened its relationships with financial institutions and companies in different sectors, it began to understand the pain points of these industries better. Many of these institutions are now ready to embark on the digitalisation journey, and the company is eager to introduce different solutions to serve their needs.

“Now, as a business, we have more opportunities. One door opens to the next door. We have a number of products that help clients in the banking and insurance sectors to automate their processes. It’s not just one product because every step of the way, there are multiple problems to solve and you might need a slew of different solutions,” says Lim.

One of these solutions is Docubot, an artificial intelligence (AI)-powered document processing service that was introduced last year. The financial industry must analyse many documents, whether it is loan applications or insurance claims, and has to be wary of fraud. Docubot is meant to automate this process and provide instant responses using AI-powered intelligent document processing technologies.

“In the past, when people submitted their payslips, you needed to look at it [manually]. Now, Docubot is able to lift the information, contextualise and analyse it, and to a certain extent detect forgeries,” says Lim.

In 2023, it launched Voicebot, an AI-powered conversational bot to automate telemarketing and provide customer support, among other services.

“Voicebot helps banks do payment reminders without having to use a human. It speaks ‘manglish’ instead of [using] some American accent. You can ask questions and converse with it,” says Ang.

The product is also aimed at financial institutions, which can use it to automate the process for verification, document submission and the e-know your customer process. “We’re looking at building solutions to support a fully digital [ecosystem],” says Ang.

Listing and regional expansion plans

Finology’s most recent funding round was meant to further fuel its growth and innovations. It now has a team of about 60 and its solutions are used in Malaysia, Pakistan, Nepal, Cambodia and Indonesia.

Silverlake Group, which has been providing financial technology solutions for financial institutions since 1996, has become a strategic partner as well as a key investor.

“We were looking at a strategy angle because there were a lot of deeper conversations [with them] about how our products can be innovated. Their experience in building huge product ranges for banks benefits us in a lot of ways, alongside their relationship with banking clients globally and in Malaysia,” says Ang.

The company is now raising its Series A funding so that it can establish a stronger presence in other countries, he adds.

“Where we want to go in the future is we would like to list the company, for sure, so we can do more and offer more [solutions] regionally, as well as grow our product range.”

According to Finology’s report obtained from the Companies Commission of Malaysia (for the financial year ended 2022), the company last recorded profit after tax in FY2020. This is because the company is currently in a growth phase, say the founders, who are optimistic about future possibilities.

“I get excited about where we can fit into the trends. Strategically, we can make decisions to develop products ahead of the trends that we see in the market. We see a lot of opportunities in the automation path and in AI-driven [technologies], and configurable engines and solutions that you don’t have to code from scratch,” says Lim.

Additionally, many digital banks are currently developing their technology in-house, he observes, but eventually, they might start outsourcing tasks to focus on their core services as a bank.

“We have seen the number of enquiries coming in grow more than five times in 2023 than in previous years, and we see that continuing,” says Lim. Many of those that are interested include traditional banks and lenders.

“It’s a very exciting year for us as a company, in view of all the trends that are coming.”

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