Entrepreneur

These M'sians Are Bringing A Tech Upgrade To A Field Dominated By Banks And Ah Longs

Direct Lending seems to have a whole large market open to them.

They’ve set themselves up as a loan application option for those who—for one reason or another—can’t or won’t get a loan from a bank.

Seems a tad dodgy, right?

We thought so for a while too, until we saw that they have now become part of MaGIC’s inaugural Global Accelerator Program. The double take got us to look a little closer at what they do and to get a better sense of how they do things.

And sure, providing loans to those who usually can’t get them elsewhere is the source of most of their clientele.

But on a larger scale, their vision lies in simplifying the traditionally difficult loan-application process.

How? With technology, of course.

First, you can check if you’re eligible, and the rates available to you, pretty much instantly.

When you key in your information on the platform, it automatically curates loans that you’re eligible for. This way, users aren’t bombarded with aggregated data and can zoom directly into what applies to them.

By developing the tech behind the platform, the team sets out to create more transparency in this usually tight-lipped industry. This in turn might help curb:

  • Consumers turning to alternative sources such as credit companies or money lenders when emergencies hit.
  • Irresponsible parties misrepresenting or mis-selling loan packages they have to offer (which might earn them higher commissions etc.).
  • Lenders charging exorbitant interests rates, to outright scammers who ask for an “upfront” fee before vanishing.

In fact, the team has close to 90% loan approval rates from their platform, once they pass the borrower over to financiers to take over the underwriting and collecting.

A screenshot of how to check eligibility / Image Credit: Direct Lending

We got in touch with Yik Seong, CFO of Direct Lending, who believes in building a business that can have a positive impact to society.

“We try our level best to make sure that from a financial standpoint we can cover ourselves, but at the end of the day, if we’re just in it for the money, this is too much hassle. We do this because we want to address an inssue in the society, but we’ll also look into building a sustainable business.”
– Yik Seong

Moving In A Grey Area Market

They started at the end of 2016 by distributing civil servant personal loans underwritten by RCE Capital, a Bursa Malaysia listed company.

10 months into the business, the platform offers everything from transparent loan details, to even cash rebates for their borrowers.

“The market is a very grey area because it’s an underserved market. From a borrower’s standpoint, you don’t know who is doing what until you go through the whole journey with them,” said Yik Seong.

By leveraging on technology to make the process more efficient, they also lower down operating costs compared to the traditional, usually offline borrowing channels. This allows them to redistribute commissions as rebates to their borrowers.

This is perhaps why they were one of the only 3 Fintech companies to be signed on with MaGIC this year.

That being said, the team is still obligated by certain procedures and red tape behind these processes to ask for some physical documentation, though they try to minimise this as much as they’re able.

Yik Seong comes into the team as an accountant by training, bringing his 8 years as an international capital market banker into the business.

Co-founder and CTO Soon Tak has 8 years worth of experience in programming and system engineering. And seeing that he also had a stint specialising in banking and insurance delivery softwares, he does know a thing or two about loans.

Speaking of trying to help curb potential scammers who disappear after getting an “upfront” fee, the team had an experience with them recently.

A Brush With The Dark Side

Just last month, a scam group emerged using their name to suck money out of the very borrowers Direct Lending was hoping to protect.

“What happened is that we had some consumers call in to ask if so-and-so was working with us. The first one we thought was just a one-off thing. But then a few more came in, so we tried to find out more.”

To add a layer of legitimacy, the scammers even had the victims’ full names and IC numbers. The scammers even went out of their way to imitate everything from Direct Lending’s business cards to email addresses.

All the scammers ask for, of course, is RM3,000 to RM5,000 of cash as processing fees.

The team scrambled to deal with the issue, including lodging a police report to let the authorities sort it out, as well as issuing warning posts on their website and social media accounts.

“We were aware about it, but now we finally see how it happens up close. The reality is, these people are obviously a bit desperate for cash, and these syndicates know it. So they try to take advantage of their emotions.”

“It’s a first time we dealt with that. It really impacted us, because I guess we didn’t expect that for a startup that’s less than one year old, there are people already using your name.”

“So maybe we’re doing something good,” quipped Yik Seong.

The irony is that in going to social media to try and warn as many Malaysians as possible away from this scam, the team ended up seeing a surge in their website traffic.

“I think being upfront and being transparent at that moment, we actually saw a surge. Some of them actually called in to ask about the scam, and after questions they usually finish off with: Can I get a loan from you?” 

They weren’t expecting it, but they decided to look at it as building the right trust.

“We can’t stop these people, because we can never know who they are. But we use this as a learning point, and as a way to improve what we’re doing now. We explain to customers as transparently as we can, and they trust us in return.”

In fact, it’s this transparency that Yik Seong feels is the key offering of Direct Lending. For their next step, they plan to open up their platform to the private sector, as their services are currently only open to civil servants.

“We also want to leverage on the digital data that we are collecting through the platform to build an alternative credit model, by looking at non-traditional data point to assess their credit risk, that we can use it to lend these people.”

They also think that the lending industry is going to move towards a more digital, online path. If Direct Lending is right, it seems like they’ll have first mover advantage to help them.

Editor’s Note: One line has been added to the article to clarify Direct Lending’s current focus.

Feature Image Credit: Direct Lending