Technology / November 2018

A Fully Pledged Digital Banking

By Sarah Yuniarni

With its mission to achieve financial inclusion by presenting the first financial technology products that provide Indonesians with access to funding, Tunaiku has a vision of becoming a digital bank that offers easy and fast loans with light installments for those in financial need.

Introduced in June 2014 and listed as one of the loan products offered by lender Bank Amar Indonesia, a banking institution that has gone through a major transformation in utilizing technology to offer fintech lending products in the banking sector.

With more than 100,000 registered customers and having disbursed more than Rp 1 trillion ($65 million) in unsecured loans to middle-income earners in Indonesia since its founding, Tunaiku now plans to target small and medium enterprises engaged in e-commerce to tap exponential growth in the industry and expand its customer base.

"We have received a lot of demand from micro-SMEs doing online selling on e-commerce sites or food stalls and such," Tunaiku managing director Vishal Tulsian told GlobeAsia in an exclusive interview on the sidelines of the International Monetary Fund-World Bank Annual Meetings in Nusa Dua, Bali, last month.

"They need Rp 40 million to Rp 50 million as opening capital and they also don't need collateral. So, this is a segment for which we are about to launch a business plan in November. So, it will be for next year," he said.

Bank Amar, owned by Singapore's Tolaram Group, offers banking transactions, cash deposits and loans, the latter via its Tunaiku platform, which is a flagship product uniquely positioned within the bank's organizational structure.

Tunaiku, which aspires to become a fully fledged digital bank in Indonesia, provides unsecured loans from Rp 2 million up to Rp 20 million through a smartphone application and its website.

"We are the only bank to have an approved fintech product and the agility of fintech," Tulsian said.

Tunaiku uses a sophisticated algorithm to assess loan applications and although borrowers must still submit copies of supportive documents and physically sign the loan agreement – which are collected by a courier – it offers a much faster service than traditional lenders.

It also offers easier installments than other fintech providers, as loans are offered in tenors ranging from six to 12 months.

Many fintech players typically offer "speed loans" of less than Rp 2 million with tenors of seven days, two weeks or a month, and interest rates sometimes exceeding those charged by credit card issuers.

Some fintech players offer loans of up to Rp 10 million, but the tenor is usually less than six months, putting a huge burden on borrowers.

Operating under the auspices of the Surabaya, East Java-based bank, and having had a presence in Indonesia since 1991, Tunaiku must comply with regulations laid down by Bank Indonesia and banking regulator, the Financial Services Authority (OJK).

Referring to the results of a short questionnaire given to each loan applicant, Tulsian said most of Tunaiku's customers take out loans to pay for home repairs.

"Our customers urgently need funds because they don't have any collateral. They want to improve their lives, but if they approach traditional banks, they must have collateral. And small loans are not available," he said, adding that this is where the digital lender can plug the service gap.

Tulsian said the lender expects such products and services to help the Indonesian authorities meet the target of increasing the proportion of the country's population with access to financial services to 75 percent. However, he also acknowledged that fintech should not cause financial instability.

With more relaxed requirements than banks in terms of borrowers' credit assessments, and some fintech players even ignoring the central bank's credit scoring facility, fintech services have come under criticism that they could damage the financial system. Meanwhile, there are also concerns over the collection and storage by fintech companies of customer data, which may be prone to mismanagement or abuse.

"While inclusive growth is very important ... financial stability should not be disrupted," Tulsian said, adding that Tunaiku guarantees that it will keep all customer data safe and not allow privacy breaches.