Digital Credit Card - Photo by Kredivo

JAKARTA (TheInsiderStories) – FinAccel, a Southeast Asia-based startup that offers a digital credit card service in Indonesia through Kredivo, has closed a US$30 million investment as it begins to consider overseas expansion.

The Jakarta based startup has raised Series B equity investment round led by Square Peg Capital, with participation from new investors MDI Ventures and Atami Capital, and from existing investors Jungle Ventures, Openspace Ventures, GMO Venture Partners, Alpha JWC Ventures and 500 Startups.

In just over two years since launch, Kredivo has become the most widely adopted alternative checkout and digital credit payment method across Indonesian e-commerce merchants including Tokopedia, Shopee, Bukalapak and Lazada, and more than 200 overall.

Kredivo has credit scored nearly two million Indonesian consumers and helped e-commerce merchants increase sales and customer retention significantly.

Tushar Roy, Partner at Square Peg Capital said, “We are very excited to support the team’s vision of enabling better financial services for Indonesian and SEA millennial.”

Nicko Widjaja, CEO of MDI Ventures, a part of Telkom Indonesia, added, “Kredivo is the first lending-tech company in our portfolio. With our participation, we hope to push more into under-served market segments while leveraging Kredivo’s key strengths around technology automation and fair pricing.”

Akshay Garg, CEO of FinAccel stated, the company intend to use the new funds to build out new product lines, expand geographically and hire more talent with the aim of becoming the preferred digital credit card for SEA millennial.

The company launched its ‘Kredivo’ service to help consumers pay online in SEA, where credit card penetration is typically low, and it is essentially the combination of a digital credit card and PayPal. The service is available in Indonesia, Southeast Asia’s largest economy, where it uses a customer’s registered phone number and a dedicated checkout on online retail websites.

For consumers, the service offers a 30-day payback option and then more longer-term options of three, six and 12-month payback windows. The 30-day option is interest-free, but other plans come with a 2.95 percent per month charge on the reducing principle, which effectively makes it 25 percent flat.

FinAccel founders (left to right) Umang Rustagi (COO), Akshay Garg (CEO) and Alie Tan (head of product engineering)

The startup raised a seed round of over $1 million in 2016, before quietly raising a $5 million Series A last year. Garg, who founded ad tech firm Komli, said the company is processing “hundreds of millions” in U.S. dollars per year and the immediate plan is to keep growing in Indonesia. However, it is eyeing up potential expansions with its first move overseas is likely to be in SEA in early 2018, although he declined to provide more details.

The financial technology (FinTech) players are shaking up the banking sector in Indonesia to provide payment and lending facilities and collaboration between the two is likely inevitable in the future.

While last year the banking sector only posted a 8.1 per cent loan growth, FinTech lending rose in a significant pace. According to data from the Financial Service Agency (FSA), lending from tech companies providing financial services rose by 952 per cent to Rp2.6 trillion in January 2018 from December 2016.

There where more than 250,000 people had taken out loans through FinTech companies, data from the FSA showed and regulator sees lending from FinTech companies could reach Rp3 trillion this year.

According to the PT Digital Artha Media data, currently there are around 196 FinTech firms in Indonesia and 25 among them have secured the licenses from FSA and another 33 FinTech firms are in the process to get the license, .

The FinTech lending in Indonesia are dominated by the two peer to peer lending firms with the two biggest players are Investree and Modalku. In 2017, the Investree distributed lending of Rp380 billion and by the end of this year targets to distribute Rp1 trillion. While Modalku distributed around Rp450 billion in the same year.

The impressive growth of FinTech lending in Indonesia will continue brighter since the country has a huge population of 260 million people. The future of FinTech lending in Indonesia also driven by huge users of smart phones reached 100 million in 2017.

Currently, around 143 million people connected to the internet in 2017, according to the Association of Indonesian Internet Service Providers data. The majority of these netizen located in the urban areas.

With such a huge population, the inclusive financial rate only reached 63 per cent of the population by the end of 2017. It means there are 165 million people who cannot access the financial services. Currently, only one in the three adults have bank accounts, it was around 34 per cent of GDP in 2015, the lowest among Asia Pacific countries.

The FinTech lending will continue to be in demand in Indonesia because it offers easiness. It does not the collateral and the debtors can submit the documents anytime.

Although the fintech lending has large potential in Indonesia, it faces some obstacles. The main obstacles are the lack of data to assess the feasibility of prospective debtors. Before giving a loan to a user, a startup FinTech lending should check whether the prospective user will be able to return the money or not. The assessment is commonly known as credit scoring.

In other countries, there are many third parties who provide the credit scoring services, but this service is rarely available in Indonesia. As a result, the fintech lending should be the both lender and credit scorer.

Written by Staff Writer, Edited by Linda Silaen, Email: theinsiderstories@gmail.com