We started building a comprehensive in-house business model with the launch of the Robocash prototype, an online service for short-term lending, in Russia in 2013. Meeting various challenges, we managed to form the necessary background.
In the very beginning, we could not find IT vendors, to develop the software we needed. Then, there were cases when external contractors gave poor results. Among other factors were the specifics of our work and the need to contact clients directly. Hence, we also created customer care, collection, and other departments.
Over time, we saw that to do everything in-house in a rapidly changing market was not only possible but also highly productive. The first significant challenge started in 2017 with the regulatory tightening in our home market.
However, the high agility of the service allowed us to adapt safely and quickly to new requirements and maintain customer loyalty. Staying independent from third parties, we continued developing our skills and strengthening market positions.
Last year was a period of dynamic changes in alternative lending in Russia. Many competitors slowed down and left the market. Meanwhile, in 2018, we increased our annual disbursal by 2.1 times.
Also Read: How Southeast Asia can benefit from a new wave of Russian innovation
Scaling the model internationally
In 2015, we began international expansion. Already in 2017, Robocash entered Southeast Asia in the Philippines. In the following two years, we launched services in Vietnam, Indonesia, and India. These markets have revealed the full power of the in-house model.
We applied all our best practices to keep up such dynamic growth despite the need to adjust products to each particular country. Today, we usually take four months to launch a new service. This time is enough to prepare the legal part, develop the product, build and train the team, etcetera.
On the one hand, our experience in scaling the model in other countries by the Asian expansion explains it. On the other hand, the specifics of each country we had to deal with still determines the logic of services.
The brightest examples are the identification system AADHAAR in India and the provision of sharia-compliant financing in Indonesia. However, it has not changed the core principle of our work.
In other words, the vast skill-set enables the team to do different tasks on its own. In this sense, every new project only grows its overall proficiency. The dependence on third-party software developers, outsourced scoring, customer care or another important direction would make it rather complicated to maintain such dynamic.
Nevertheless, the regional specifics determine the main benefits of the in-house model in South and Southeast Asia. The reasons are as follows.
Enormous market potential with undeveloped infrastructure
In India and SEA countries, more than 0.4 billion adults have limited access to banking services, and another 0.5 billion do not have it at all. Moreover, in countries such as Myanmar, Laos, Cambodia, the underdevelopment of the financial ecosystem, as well as market competition, gives chances for notable progress.
Also Read: What makes investments in fintech and alternative lending in SEA promising?
In the absence of credit bureaus or collection agencies, an in-house model becomes particularly relevant. Companies that will enter these markets and achieve break-even quickly may count on substantial benefits and the status of strong players.
High informal employment
When it hard for a customer to confirm income officially, it takes developing non-standard scoring algorithms that prove efficiency only by cuts and tries. At the same time, many countries of the region, e.g. the Philippines and Indonesia, have high internet penetration.
That can provide valuable information for the assessment of customers. Together, these factors increase chances for businesses to succeed.
Rapid changes in technological and regulatory fields
Most countries in South and Southeast Asia are now developing special requirements for alternative lending. Technologies are evolving too supported by the growing use of smartphones, the quality of communication and overall internet penetration. As a result, the market observes changes in both rules and customer demand. Therefore, the ability of a business to adapt quickly only increases its importance.
Similar customer profiles
A typical client of alternative lending services is a middle-aged person leading an active lifestyle. There are quite many women and people from rural areas among customers. So many similarities in the client profile make the region attractive for intraregional scaling of a service that works with a broad audience. Still, we would not recommend expanding the same application to several countries as it is. Sure, there should be standard elements to serve as starting points. Every project should nonetheless consider peculiarities relevant to that or another market to reach full efficiency. It concerns internal architecture too.
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Formation of a regional fintech environment
In the past few years, countries of the region have significantly intensified their cooperation in fintech. Already today, there is a whole number of cross-border projects and associations. All this helps advances the formation of a united environment in digital finance.
As a result, companies that develop and apply solutions, which can be adopted in different markets, will find it much easier to integrate into such consolidated regional infrastructure.
In general, South and Southeast Asia stay the most promising regions in the world for the development of fintech now. Companies, which have chosen to do everything on their own, have a chance to test the performance of in-house solutions in a diverse, quite specific, but attractive in its challenges environment.
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