Fintech Innovation spoke to Dmitry Voronenko, co-founder of Turnkey Lender to discuss what he sees are challenges facing the industry and the opportunities that lending platforms present to both incumbents and startups
By Allan Tan, www.enterpriseinnovation.net
One of the early darlings of the Fintech-led disruption is the lending ecosystem, and it is easy to understand why. On the one hand, you have individuals and businesses that continue to be ignored by traditional lending institutions for any number of reasons including lack or poor credit score, inadequate or zero collateral, or lending value too small to fit into existing market segments.
On the other side of the story, you have investors – both individual and corporate – that find the meager returns offered by financial institutions not good enough incentive to take on the trouble of jumping hoops to meet regulation-imposed processes. Rising to bridge the divide are the challenger banks and non-bank companies that are using technology to create cost-effective, easy to use platforms that cover the needs of both sides of the lending spectrum.
“The value chain of lending is changing, thanks to new trends like Open Banking (that is why you have agent banking) or P2P lending. But it is still comprised essentially of funding/pricing; and the customer lifecycle of origination-disbursement-servicing-collections-recovery. But the two solutions areas are filling the gaps that are most obvious (where there is an obvious unfilled need) in Asia/Pacific,” says Michael Araneta, associate vice president, IDC Financial Insights.
In this context Fintech Innovation spoke to Dmitry Voronenko, co-founder of Turnkey Lender to discuss what he sees are challenges facing the industry and the opportunities that lending platforms present to both incumbents and startups.
What is the composition (makeup) of a lending platform?
Dmitry Voronenko: Specific to e-lending there are four components:
Technology: A cyber secure cloud and a fully managed solution that’s easy to access and easy to use with 24/7 tech support for customers. Business Intelligence: An intelligent software that allows users to view data, create reports and map business dynamically and in real time. Documents and forms should be easily attached to the account and sent easily, easy to export into key office products direct from the e-lender’s platform and allow instantaneous communication with key partners. Decision-Making Engine: A fundamental part of the e-lending platform is to have a system which allows decisions to be made and delivered to customers and investors in real time. We have an integrated credit scoring functionality to score and approve or decline the application in just a few seconds. Credit decision rules based on customer credit report, bank details and affordability with no specialist IT knowledge to set and edit the rules of engagement with a customer.
Business Automation: Key to the success of e-lending is to automate the payment and collection process according to the rules set by the user.
There are many incumbents and startups whose core business is lending. Why build another lending platform? What is the marketing opportunity for a lending platform in the Asia Pacific?
Dmitry Voronenko: When Turnkey Lender first started in 2015, we were one of the first companies in Asia to provide alternative lending to businesses. Alternative lending was already a trend in Europe and America but it had not penetrated the Asian market at that point. Having had 20 years of prior experience in running start-ups and working in the financial industry, my business partner, Elena Ionenko, and I saw clearly an opportunity to bring e-lending business to Asia. Asia’s large population of smartphone-savvy and unbanked makes it a prime market for alternative lenders. By leveraging on digital platforms and technology to provide businesses and individuals with financing opportunities outside of the traditional finance system.
For businesses considering going into lending, why should they consider outsourcing the technical aspects of lending over to a provider like Turnkey Lender?
Dmitry Voronenko: For non-banks, it is hard for them to acquire the knowledge and expertise in advanced credit scoring and loan management. We took all our expertise in making lending software for banks, from credit scoring, decision automation, and smart analytics, and condensed them into one platform
The key benefit of using e-lending is in its automation. As Turnkey Lender’s name suggests we literally “turn the keys” (automate) lending by making lending accessible to anyone. Our software is an online lending platform that automates the entire loan process for any non-bank lenders. Powered by machine learning and data analysis to understand potential loan applicants, ranging from small scale to large scale loans. Our goal is to enable new lending companies with the bank-grade technology and to help existing small and medium-sized lenders to digitize their services.
If you have two companies that want to do lending in the same market, for example, Singapore, and approach Turnkey Lender to rent its platform, where is their differentiation?
Dmitry Voronenko: That all depends on their lending parameters. Lenders can set their own criteria, which can be added into the credit scoring system. The two companies could have very different loan portfolios catering to different target audiences.
What is Turnkey Lender’s biggest competitive advantage versus the competition?
Dmitry Voronenko: We pride ourselves on being fully customizable. For the smallest lenders, we provide a basic credit score card that differs from country to country. The software can, for instance, draw data from blacklist databases and source information about potential borrowers’ online activities. Lenders can also set their own criteria, which can be added into the credit scoring system. The accuracy of the scorecard is evaluated by us. The team will make adjustments to the scoring system to ensure it caters specifically to a particular lender. Over time, the scorecard will become personalized to the customer base that the lender caters to.
Turnkey Lender’s software has the same capabilities as banks’ credit management systems, and also comes with other less conventional elements. For instance, it includes data on online spending, phone bill payment patterns and social media activities.
Our company also has a unique business model. We do not charge for the software, instead, we take a fee for each performing loan every month.
How do you see the lending marketplace evolving in 2019?
Dmitry Voronenko: With the rise of FinTech solutions and innovations, we will see more companies jumping on the bandwagon as alternative lenders. Alternative lending has evolved as a viable and less complex, making it an attractive avenue for SMEs.
Banks across the world are closely watching this segment to ascertain the sustainability of the lending as a business model, and many are starting to get involved in some form or the other. A few large banks have partnered with various online lenders and are looking to join the bandwagon as investors. A few others have taken strategic equity stakes in some of these firms, while several others are looking to start their own online lending arms.