With no credit scores, limited financial transaction histories, and a huge amount of people who don’t even have a bank account, lending money in Vietnam is no simple task. While most financiers would run from an environment like that, CEO Toms Niparts of Jeff, an app-based lending platform based in Latvia, saw it as a huge opportunity.
“We are only focused on Southeast Asian economies where financial inclusion is really a problem,” Niparts said in a recent chat with PYMNTS about his newly launched company.
“So we kind of combined the best of both worlds: our know-how about financial services from the Western part of the world with the massive opportunity in those Asian countries.”
After his first year in business — a year that also included navigating the COVID virus — Niparts said the Jeff app has been used more than a million times and helped over 200,000 people get loans.
“And that’s just one year. That’s just one country. So we are barely scratching the surface in Vietnam alone,” he said.
Know-How Meets Opportunity
As it stands, 90 out of 100 people looking for a loan are likely to get rejected, Niparts said, because the banks lack the financial data needed to calculate the risk and were using very outdated methods trying to obtain it.
“What we saw after analyzing it was that there was a lot of potential for disruption,” he said, noting that banks and intermediaries still exchanged data in Excel files. “So we’re not talking about even some primitive APIs, it’s the stone age, manual data exchange.”
It’s within that backdrop that Jeff has been able to get a toehold in the market, by offering a simple, convenient platform for consumers, and using alternative data to create credit profiles that increase the likelihood of getting deals done and matching a borrower and a lender.
Big Pain Vs. New Best Friend
“It’s a big pain in Southeast Asia for people to get financing from so-called legitimate sources,” Niparts said, adding that Jeff’s business plan is predicated upon giving constrained consumers the ability to access financing with other kinds of data.
The app itself, he said, is driven by a chatbot-like questionnaire that kicks in once you’ve downloaded the app, triggering a process the company touts as producing the best loan offers in just two minutes.
“Jeff is not some compare loans dot com site. Jeff is positioned as your new best friend to find the best financing offers,” he said. “It’s as intuitive as talking to your colleague or your friend over Facebook or WhatsApp or any other messenger.”
Currently, the loans Jeff arranges typically go from $100 for a new phone to a few thousand for a motorcycle, but the company hopes to grow into doing more large real estate lending in the future.
Alternative Credit Score Building
“Our goal here is not to be in a position where we are the biggest loan comparison or aggregator site in the market,” Niparts said. “Our goal is to be the guys that can provide a credit score in a situation where there is no traditional financial data.”
To build the business, in Vietnam or elsewhere, is a long process where client acquisition is the biggest cost, and that’s done by aggregating and analyzing data.
“It really comes down to understanding how we can get more behavioral data from people, how we can try and project and predict more of their spending and income patterns,” he said. “What we are seeking and what makes or breaks the business is increased frequency, which brings higher volume of data.”
Once a relationship is established, whether with a bank, telecom or insurance company, Niparts said Jeff offers its lending partners additional data, which it can then monetize through additional finder’s fees and commissions. As Niparts explains it, the more consumers use Jeff, the more data they can gather to build a better credit score and in turn support additional future lending.
“Obviously a key thing to understand is if we bring them [lenders] a bad quality clientele, they will just halt their partnerships with us. So we are really conscious and cautious about that,” he said.
Just Getting Started
While Jeff is focused on Vietnam right now, it is planning to expand to Indonesia and the Philippines next, with its sights set longer term on Bangladesh and Pakistan, an objective that would place it in five of the 10 largest Asian nations with a combined population of more than 600 million consumers. Compared to the West, Niparts said Jeff is “able to do a bit more stuff” in Asia due to looser data regulation and restrictions.
“We just got started in 2020, which was a very unique time to be born as a startup,” Niparts said, but admitted to being lucky to have landed in Vietnam which has fared better than most of its peers, both economically and in terms of containing the coronavirus.
“Our ambition is to be in the economies that we have identified as developing markets where we see a ton of potential for this kind of solution, where nonfinancial data can be used to great benefit to boost financial inclusion,” Niparts said.