Neobank as Koinwork's Further Validation to Encourage more Bankable MSMEs

The Indonesian p2p lending business is entering its mature phase. Meanwhile, inclusive access to finance for MSMEs is still an unresolved homework. KoinWorks, which recently started working on neobank, believes that this solution can slowly help MSMEs level up from being underserved and underbanked to bankable.

In an interview with DailySocial.id, KoinWorks' Co-founder & CEO, Benedicto Haryono said that as long as the company stays as a p2p lending business, the conversion rate is turned out to be relatively low, aka below 10% of the total incoming leads. It occurs due to MSMEs being overfinanced, not eligible for funding, or don't have urgency for funding.

The segment that was rejected by KoinWorks actually has potential to be explored in the future, considering the type of loan provided is productive. In other words, they certainly want their business to grow. “We thought of, what if we gave a more general product, it doesn't need a lot of requirements. This can be a solution as if they need credit, they are qualified and can immediately get funding,” told Ben which is known as Benedicto's nickname.

KoinWorks NEO is an integrated financial platform for MSMEs, freelancers, content creators, and start-ups. With NEO Card and financial management services, this product enables users to fulfill their business needs. From remittances, payment link services to create payment links, monitor financial condition, and expense reports, and all the financial literacy assistance business owners need in order to grow their business.

Through KoinWorks NEO, the company provides its own added value that is different from lending. In an observation, other MSME issues are financial records that have not been integrated or manually still, using books or Excel directly done by the business owner due to limited resources. Eventually, a lot of time was wasted, and business owners could not focus on developing their business further.

In further detail, Neobank's one solution is to provide accounts receivable that are automatically reconciled and equipped with an auto-reminder feature for re-billing. This solution is expected to save business owners' time, also from the point of view of increasing consumer experience.

"We want to encourage these MSMEs to start managing operations, finances, and grow with us, before receiving financing from us. By providing another experience in terms of financial policies that are more suited to their growth and in accordance with our vision."

He continued that the business, which has been supported by KoinWorks for five years of operation, is claimed to have an impact as proven by the positive average growth of sales. The improved business has reached more than two million. "Hence, this neobank validation is part of the mission we implemented from the beginning that we want to realize more helping MSMEs in Indonesia."

In building KoinWorks NEO, Ben continued, the company also collaborated with various partners through the BaaS mechanism, excluding Open API. He said what KoinWorks need as a company is more specific and customized for MSMEs. Meanwhile, in the current Open API solutions, there is no specific answer to these needs, it is still limited to consumers.

"Therefore, we work directly with financial partners and only use features that are relevant to us from Open API players such as Finantier, Ayoconnect, and Brick."

Ben further explained that KoinWorks NEO has a financial management service that automatically combines financial activities and money movements; quick and easy access to business loans, for example, access to various loans for various purposes, including installment loans, earned wage access (EWA) for their employees.

At last, the virtual card “NEO Card” which functions as a prepaid and charge card is supported by Mastercard and BNI to simplify online transactions through the Virtual Card Number (VCN). In addition, the NEO Card can be used to process any local or international payment transfers for free.

Growth machine

As a startup aiming to pursue growth, amid the growth of the lending business which is no longer exponential, the company will rely on KoinWorks NEO as its engine. The lending business will continue to be the company's biggest profit-generating engine due to its large volume, even though its growth is only 3%-5% per year.

“However, from the growth of the transaction data ecosystem and user base, NEO will be the largest. Therefore, it will grow x percent, around 20-25 percent of the NEO user base that can get financing and there is a value service that we can provide to them as well.”

The company will also be more aggressive in entering the second and third-tier cities, considering that it has only available in the urban. This step will be done through KoinWorks NEO. He also mentioned that in the midst of slowing growth in the lending business, as it is starting to mature, market segmentation is increasingly formed with their respective specializations.

It is different from the early situation when almost all players worked in all financing sectors. That time triggers the public's extensive knowledge of a lending company. For example, people will associate Amartha with women's productive loans, ALAMI for sharia loans, and for MSMEs, there are Investree, Modalku, KoinWorks, and so on.

“Today's market knows more about the lending segment and knows what they are looking for. In the future, penetration must be increased to tiers 2 and 3, while we are still in tier 1 so we need extra effort so that our services can be more diverse.”

From a managerial perspective, the company added new positions to generate more focus. Among other things, the Strategy Division focuses on creating value and the overall direction of the company, as well as ensuring that KoinWorks will continue to build the Indonesian MSME ecosystem. Moreover, the Product Division that is fully data-driven will be stronger and sharper in solving complex problems into simpler ones to produce the right products.

Next, the newly formed Platform Division will constantly look at user experience, especially MSME players by building an ecosystem that helps them from starting a business to growing beyond MSMEs.

Synergizing with the Product Division and Platform Division, the Wealth Division is committed to helping KoinWorks users through investment products that are in line with the user's journey to achieve financial goals. Meanwhile, the Marketing Division will maximize KoinWorks in helping users to recognize the benefits and ease of accessing digital financial platforms such as KoinWorks.

In five years of operation, the company, which used to solely distributed loans to MSMEs, now has a series of products, such as digital gold savings, artificial intelligence (AI)-based automated P2P funding, invoice guaranteed financing, education fund financing, early wage access, and bond purchasing. Until the beginning of this year, KoinWorks had disbursed Rp11 trillion in funding.

–Original article is in Indonesian, translated by Kristin Siagian