Deal focus: Southeast Asia’s four-trick credit pony

Plenty of e-commerce marketplaces aspire in Southeast Asia to become lenders, seeking to turn their troves of transaction data and customer relationships into a competitive advantage in underwriting. Advance Intelligence Group has moved in a different – though not directly opposite – direction, from B2B technology provider to online lender to e-commerce enabler.

It speaks to the hit-and-miss, pivot-and-repivot behavior that characterized the five-year-old start-up’s early days, before the vision solidified into an artificial intelligence-enabled platform for credit services.

“We tried many different things and found ourselves with access to a lot of data, through relationships with people who accumulated consumer data, and supplementing that with social network data, telco data, and more traditional data from credit bureaus,” says Lei Chen (pictured), CFO of Advance Intelligence. “We ended up building a set of analytics for KYC [know your customer], anti-fraud, and credit scoring.”

This business became known as Advance.AI. The analytics gave birth to a set of technologies that detect fraud using facial and optical character recognition, allowing customers to cross-check documentation with a database of known fakes and establish the legitimacy of what is submitted. Advance.AI processes over three million queries every day, and its identity verification engine has a 99% accuracy rate.

Advance.AI raised $130 million across three rounds. Advance Intelligence, which recently secured $400 million in funding led by SoftBank Vision Fund 2 and Warburg Pincus, at a valuation of more than $2 billion, represents the next phase in the company’s evolution. The one-trick pony now has four tricks, with digital lending, buy now, pay later (BNPL) and e-commerce services joining the AI engine.

Underwriting edge

In fact, the second trick – digital lending – emerged within two years of the AI engine. It came about because the traditional banks that comprise Advance.AI’s client base liked the risk management capabilities and asked the company to move into risk assessment and underwriting, an area where they were still uncomfortable.

“The problem in many emerging markets is someone claims to be John Smith in apartment A, but there may not be a John Smith living there at all. We have the full sweep of KYC and anti-fraud capabilities to weed out a lot of that risk,” says Chen.

“Once you are comfortable with that element of risk, you are left with the credit risk – whether a borrower has the ability to repay. That’s more of a traditional assessment, based on education, job, earnings. Institutions can do traditional credit risk assessment reasonably well, but as for trying to ascertain whether John Smith is John Smith, not so much.”

Advance Intelligence has a digital lending platform in China by virtue of its earlier pivots, but the flagship product is Indonesia-based Kredit Pintar, which has achieved more than 20 million downloads and $1.5 billion in loan disbursements to date.

Unlike many digital lenders, funding hasn’t been a problem. The traditional banks that pushed Advance Intelligence in this direction wanted to put capital to work, and Chen describes the company’s role as that of middleman matching lenders and borrowers, although it is assuming the risk. There is a difference between knowing how to assess risk and the practicalities of lending, portfolio management, collection, and recovery, he observes.

Nevertheless, Advance Intelligence claims to have emerged from COVID-19 with its reputation enhanced. Having a footprint in markets like China that went into lockdown relatively early, it was prepared when Indonesia followed suit. The company quickly went risk-off, returning capital to investors and shrinking its balance sheet. This made it easier to resume disbursements, albeit selectively.

A cohesive platform

Digital lending remains the main revenue driver. It is truly mass-market and involves unsecured consumer loans that sit at the lower end of the credit curve, where risks are high but so are interest rates. Meanwhile, BNPL and e-commerce enablement are barely 18 months old, and scale is a more immediate priority than profit.

BNPL is Advance Intelligence’s pitch to move higher up the credit curve because customers tend to be aspirational and they are splitting up payments for larger-ticket items. Moreover, the credit is embedded in a specific transaction. Atome, the BNPL platform, works with more than 5,000 online and offline retailers across nine markets.

“We want to work with e-commerce platforms because they have large user bases and bring volume and consistency,” Chen explains. “But we are also targeting brands, category leaders in high-value verticals where BNPL can replace marketing efforts to some extent. They see more traffic from our app to their ecosystem and increased basket size for people checking out with us rather than paying cash.”

Ginee, the e-commerce enablement business, fits into the overall jigsaw puzzle as a source of merchant, consumer, and transaction data, as well as a future revenue generator. It serves as a one-stop-shop for small merchants to manage product postings, order fulfillment, and customer communication across multiple e-commerce platforms.

It has processed over 130 million orders with annualized gross merchandise value (GMV) of $2 billion. More than 80 million unique consumers and 100,000 merchants have transacted on the platform to date. This information feeds into the AI engine and ultimately into Kredit Pintar and Atome as well, helping Advance Intelligence to make better credit decisions.

The four tricks are intended to interact in terms of business development as well. “BNPL will be the first to expand into new markets, and as we establish critical mass, we will unfold digital lending,” says Chen. “BNPL generates data on users that enables us to localize our AI and data analytics to support risk-taking on the digital lending side. We can also cross-sell to BNPL customers and open up to the mass market.”

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Southeast Asia
• Financials
• Technology
• Expansion
• Investments
• Singapore
• Softbank
• Warburg Pincus Asia
• Growth capital
• Fintech
• artificial intelligence
• Financial Services