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Home Credit Optimism to Face the Pandemic by Strengthening Non-Cash Financing Innovation

After Home Credit Pay and Home Credit Card, the company has introduced Home Credit Pay later

Home Credit recently introduced the service paylater to its 4,6 million subscribers. The service called "PayNanti" is planned to be available at more than 15 thousand Home Credit sales points in Indonesia.

PayNanti is one of the company's strategies to make it easier for the public to access multipurpose financing, especially during the Covid-19 pandemic.

DailySocial had the opportunity to delve deeper into PayNanti, the impact of the pandemic, to plans and strategies for developing Home Credit in the future. Here's our interview with Home Credit Indonesia's Chief Marketing and Strategy Moin Uddin.

Expand access to "Pay Later" availability

According to Uddin, now is the right moment to launch the service paylater after his party carried out in-depth research and analysis of market conditions. This effort is also in line with Home Credit's commitment to innovate to provide convenience to its customers.

For now, the PayNanti Home Credit service is only available for selected customers who have financing contracts in the partner network retailer at more than 15 thousand points of sale. PayLater service can also be used in more than 5 million merchant in Indonesia using QRIS.

"Home Credit always prioritizes open ecosystem approach to develop their business and products. Currently, we are expanding PayLater access to all customers Existing and other platforms. We have collaborated with several of the largest banks in Indonesia for payment of PayNanti bills and funding of our multipurpose financing product," explained Uddin in his written statement to DailySocial.

Meanwhile, customers can transact with PayNanti a minimum of IDR 10.000 and a maximum ceiling of up to IDR 1,2 million. However, the ceiling may increase in line with the usage patterns of the customers. In addition, every transaction with PayNanti is also free of additional fees.

Based on Fintech Report 2019 released DailySocial, paylater (56,7%) is in third place after digital wallets (82,7%) and investment applications (62,4%) as the most favorite digital financial services.

There are two factors that make penetration paylater growing. First, growth E-commerce increasing every year where the online shopping business capitalization has crossed $21 billion (equivalent to Rp294 trillion) in 2019 according to the McKinsey report, with 90% of internet users having shopped online according to WeAreSocial findings.

Second, the penetration of credit cards issued by banks is still low. Data from Bank Indonesia recorded 17,61 million credit cards in circulation as of February 2020. This figure is very small compared to the total population of Indonesia. Meanwhile, the penetration is low because the requirements for applying for a credit card are difficult for the public to fulfill.

The impact of the pandemic on Home Credit

During the pandemic, Home Credit made several adjustments to maintain its performance with the main focus on increasing product transactions and engagement to customers. The company re-evaluated its product portfolio and introduced the latest digital products, such as Home Credit Card, Home Credit Pay, and Home Credit PayNanti.

Uddin revealed, his party has become more selective in distributing financing during the Covid-19 pandemic in 2020. This is in line with the reduced number of users who apply for financing to Home Credit.

According to his records, sales volume at Home Credit fell 34% as of June 2020 compared to the same period the previous year. However, by selection underwriting Even more stringent, Home Credit claims to have succeeded in reducing the risk of default with a Non Performing Financing (NPF) ratio of 2,17%. This NPF level is still far below the maximum limit set by the Financial Services Authority (OJK), which is 5%.

In addition, Uddin revealed that he was also strengthening strategic cooperation with a number of banks to increase financing distribution. In the third quarter of 2020, Home Credit agreed to an overseas syndicated loan facility agreement (offshore) $60,5 million.

Several creditors who are members of this syndication include ING Bank NV Hong Kong Branch and Bank of China (Hong Kong) Limited as Mandated Lead Arrangers and Bookrunners, BNP Paribas as Mandated Lead Arranger, and SinoPac Financial Holdings Company Ltd. (Bank SinoPac) and Singapore Branch Malayan Banking Berhad (Maybank).

From the customer side Existing, Home Credit provides financing relief that meets certain criteria. For example, first, this relief applies to customers who are directly affected by Covid-19 (both medically and financially).

Second, informal sector workers or MSME entrepreneurs. Third, customers work in sectors directly affected by the pandemic (online transportation, tourism, hospitality, trade, agriculture, mining, real estate, infrastructure, and F&B).

Fourth, this waiver applies to customers who have a history of current installment payments and have no arrears before March 2, 2020 (can be checked on the My Home Credit App). And fifth, the items that are paid in installments are in accordance with the financing contract and do not change hands.

"In general, 2020 has indeed been a very challenging year. Almost all levels of society have been affected by the Covid-19 pandemic, including the financing industry and Home Credit. However, we view 2021 positively, where we believe that 2021 will be a period of recovery, " he added.

Optimism in the financing industry and network strengthening merchant

He said he was optimistic that 2021 would be a year of recovery due to a number of factors. Uddin, as citing a report on the MarkPlus Inc webinar, revealed that the purchasing data of the upper middle class will increase in 2022.

In the MarkPlus Inc webinar entitled "Actualizing The Post Normal: Year 2021 and Beyond Multifinance Industry Perspective", the Association of Indonesian Financing Companies (APPI) also stated that economic strength will bounce back in 2022-2025.

Moreover, the pandemic also contributes to digital acceleration and changes in consumer behavior. According to Uddin, consumers consider a number of main factors in shopping, including diverse product choices and competitive prices that influence decision making.

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"In this case, the financial industry, including Home Credit, must prepare for 2021 and beyond. Therefore, we will continue to develop technology and digital innovation to change the way people shop and make it easier for them to access financing," said Uddin.

Regarding shopping behavior, Home Credit also actually conducted a survey in August 2020 which was attended by 2.500 respondents in Indonesia. As a result, customers still like shopping activities offline. Instead of completely shopping online, respondents actually prefer offline shopping patterns and online.

"Therefore, the implication for [our] business is to diversify their choice of payment and financing methods, both in online and offline shopping platforms to make it easier, more convenient and flexible according to the needs of consumers," he said.

With these findings, Home Credit will strengthen the presence of offline financing in the merchant network this year. Non-cash transaction facilities or services are one of the company's innovative strategies to achieve targets, namely through Home Credit Card, Home Credit Pay, and Home Credit PayNanti.

Currently, the average ticket sizes Home Credit customer financing is around Rp. 4,5 million. Meanwhile, the My Home Credit application has reached almost 10 million download as of January 2021.

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