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Shop Now, Pay Later

How Indonesia’s FinAccel is enabling online shoppers to buy on credit

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BY Marishka Cabrera and Tanya Mariano - 03 Aug 2017

credit card

PHOTO CREDIT: Getty Images

The e-commerce market in Southeast Asia makes for an exciting new world. If only payment systems were so exciting.

The industry is expected to be worth $88 billion by 2025, according to research by Google and Temasek. Of this, Indonesia will take the lion’s share at 52% or $46 billion. As the fastest growing Internet market in the world, according to the same report, the Indonesian opportunity is large.

However, says Akshay Garg, co-founder and CEO of fintech start-up FinAccel, “Despite the large population and large economy, Indonesia faces a large gap in credit penetration—only 3.2% credit card penetration of nearly 260 million people.”

LENDER BE: Finaccel’s Umang Rustagi, Akshay Garg and Alie Tan

Enter FinAccel, whose flagship product Kredivo, launched in April 2016, is a digital credit card that offers instant financing to users for e-commerce purchases, offering the affordability of paying 30 days later or paying in installments. Garg says their primary goal is to fulfill the vast untapped demand for credit, and to do it in a frictionless, safe, and transparent way. It currently serves customers in 11 major cities in Indonesia. It targets, apart from the mass middle class market, Indonesia’s urban millennials, who hardly get access to credit.

Garg, 38, co-founded the company in December 2015 with COO Umang Rustagi, 30, and head of product engineering Alie Tan, 36.

Co-founder and former CMO of Jakarta-based Orami, an e-commerce site focused on females, Shannon Kalayanamitr says consumers having access to credit can help both consumers and the region’s e-commerce players in a big way. “Offering various types of payment terms democratizes credit and opens many more doors,” she says.

Here’s how it works. Shoppers can select Kredivo as a payment method at a merchant’s page upon checkout; they pay after 30 days without interest or select a three, six, or 12-month installment option, with the same fee as a credit card.

Users can qualify for Kredivo’s financing by applying through the website or app. They simply upload their KTP, Indonesia’s national identity card, and connect their digital accounts, such as Facebook and at least two e-commerce accounts, and they can get a credit limit of up to $1,500 within minutes.

Kredivo’s business model is similar to that of credit card companies and it earns from fees from both merchants and end-users. According to Garg, FinAccel has developed a “sophisticated, all-digital credit scoring system that qualifies potential borrowers based on thousands of different variables.” He adds that they use a combination of statistical and machine learning methodologies to mine data across sources, such as mobile phones and e-commerce accounts.

To guard against bad debts, FinAccel makes use of advanced credit scoring and identity verification technology to eliminate the vast majority of bad borrowers at source. Regular payment notifications, in addition to the real-time dashboard found in the app, help users stay informed of their due date. Users can pay through bank transfer or via convenience stores.

FinAccel’s investors include Jungle Ventures, NSI Ventures, GMO Venture Partners, AlphaJWC, and 500 Startups.

To be sure, the lack of third party identity and credit scoring databases remains a major roadblock to the firm’s growth. As for future plans, Garg says they cannot disclose specific yearly targets, but they expect that in three to four years, anywhere from 5-10% of all B2C e-commerce in Indonesia will be transacted through Kredivo. “We’ll keep innovating to be the most convenient and trustworthy financial product for Indonesian, and eventually, Southeast Asian millennials,” he says.

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