A Chinese financial technology company that provides electronic commerce and lending services employs artificial intelligence and big data to screen millions of Filipino borrowers who seek to borrow money or buy products on installment using a popular mobile app.
“The Philippine market is quite promising. When we first came here, we know there was a low penetration of credit card. Most of our users are unbanked users. That means banks don’t serve them. We brought the business from China. One of our investors is Ant Financial Services Group,” StreetCorner Lending Corp. chief operating officer Sean Du says in an interview in Ortigas Center, Pasig City.
StreetCorner is the company behind Akulaku Philippines which is backed by Ant Financial. The company now has five million registered users of its app in the country and employs more than 200 Filipinos in its Ortigas headquarters. Akulaku started in Malaysia before expanding to Indonesia, Vietnam and the Philippines in 2016.
Du says Akulaku employs an AI system developed in China to monitor the qualifications of credit applicants. “All the decisions are made by the AI system. Among the people who sit in the office, no one has the power or ability to influence the results. The whole thing is done by the AI. That means individuals have different credit scores and credit history. Based on those things, the system gives different scores. Each borrower pays a different interest rate and has different repayment terms,” he says.
He says the AI screening is important to manage bad debt. “The challenge is how to collect the money back. In order to prevent these things [unsettled loans] from happening, we implement a good AI. From the beginning when people submit the documents, the AI will do the assessment. The AI will divide the users into two groups: one group who will repay us and the others who won’t. From the very beginning, the AI will notice,” he says.
“From the bank, it is very hard to identify the people. But with our system, it is easier to identify the users. We use technologies like facial or voice recognition to identify the users. As long as we identify the users, then it would be easier for us to collect the money back,” says Du.
Du says Akulaku Philippines spent the last three years to develop its infrastructure. “We are expanding. We can say we are still in the infancy stage because we are a new player in this market. Now, we have 5 million registered users and transact $5 million each month,” he says.
Online lending companies have sprouted in the Philippines over the past three years amid the failure of the formal banking sector to reach out to Filipino borrowers. These online lenders, however, charge exorbitant interest rates amounting to 1 percent a day or more. They argue that their borrowers pay for convenience and quick cash that banks are not willing to extend.
Akulaku concentrates on the Southeast Asian market. Jasmine Tougan, business development officer of Akulaku Philippines, says the name is a Bahasa word which means ‘quick selling’. In the Philippines, Akulaku is promoted as the first online installment shopping mall in the country which allows customers to shop online on installment even without a credit card.
Aside from the cardless installment shopping, the company also offers short-term cash loans of P2,500 or P5,000, bills payment on installment, mobile and game top-ups on installment and travel and leisure packages on installment.
It competes with Czech company Home Credit, but the latter operates mainly offline. Akulaku says rather than competing with large e-commerce platforms such as Lazada or Shopee, it complements their services by offering installment solutions.
Tougan says Akulaku now has a thousand sellers on its platform in the Philippines, including small and medium enterprises.
Rex Pumihic, public relations officer of the company, says Akulaku encourages local companies to sell on its platform. “What is good about Akulaku here in the Philippines is that we really consider the local brands. It is a good platform for our local brands,” he says.
The strength of the company lies in its financial services. “We promote it as credit application. In the Philippines, it is difficult to penetrate unbanked users. It is an opportunity for Filipinos to use this with low interest. We already have $5 million in monthly transactions, of which 98 percent are purchased on installments. Right now, we are also accepting straight payments for those people who were not approved because they did not achieve the requirements,” Tougan says.
Du says based on second-quarter figures, Akulaku Philippines now handles around $5 million in e-commerce transactions per month. Mobile phones remain the top sellers on the platform, he says.
“We are also offering cash loan services. They just need to submit the documents to us and then we give them the credit and then they can withdraw the cash in any of the facilities that we provide them. Straight away, they can do the shopping,” says Du.
Du admits that Akulaku could easily handle more borrowers if not for the high standards imposed by the AI system. He says the system decides on who can borrow at certain interest rates and repayment terms. Application for a credit limit is also done digitally.
“Repayment is from one to 12 months, depending on the borrower’s individual credit scoring.
That’s the purpose of our company coming here—to have credit scoring. We do have a good relationship with the credit bureaus. We share information with them,” says Du.
“We don’t know if borrowers will be rejected because the whole thing is done by the AI algorithm. That’s why we are having this challenge of people complaining on social networks that their applications were rejected. People don’t complain to the banks because they are banks. We are not a bank so people post comments on the internet about us. But somehow, we try to address this because customer satisfaction is important for a company like us. We need to serve the people,” Du says.
“I am thinking that we may lower our standards for young people who are not able to meet the requirements of our system,” he says. “We care more about user experience.”
Lending companies require borrowers to have two government-issued identification cards. The strict screening, however, has helped online lending companies like Akulaku avoid the accumulation of overdue accounts or rising payment default.
Du says Akulaku is hiring more employees in the Philippines to support its expansion including credit collectors. “Akulaku provides jobs opportunities in the Philippines. Right now, we have already 200 employees and we are expanding,” he says.
“With five million users, we still have a lot of potential users in the Philippines. That means from this point, we need to expand and reach more users in the coming months and years. We need to work harder,” says Du.