1. Startups

The hustle and bustle of KTA Online, Today's Virtual Credit Card Product

Behind its great potential, there is a loophole for data abuse that always lurks

Dhimas has twice paid off his smartphone through an application Akulaku, one for his mother and one for himself. After calculating the amount of interest that was set, for him it was even cheaper than taking installments at a multi-finance company.

He bought a smartphone for Rp. 2,1 million with a tenor of six months. When he calculated, the total interest paid was only around Rp. 200 thousand.

"At that time actually tried two applications, Akulaku same Kredivo. But in the end, just take the fastest verification, that is Akulaku because it's only two hours but the limit is IDR 2,5 million. Exist plus minusit is. But if you take installments handphone di finance more expensive," Dhimas told DailySocial.

Thanks to his good track record while being a customer Akulaku, after the first installment was paid off without arrears, he received an increase in the limit to IDR 7 million when he decided to take the second installment.

Dhimas also became interested in buying prepaid credit in installments, meaning he only paid the credit bill a month later. The credit installment feature is in the application Akulaku. Usually he buys pulses around IDR 100-IDR 200.

"It's better to buy pulses here [Akulaku] so that at the end of the month it will be enough to spend it once. Let the [payday] money go everywhere."

Lukman is not much different from Dhimas. Buying goods in installments has become a habit that he is currently doing. Lukman is registered as a customer in the application Kredivo, look like Akulaku, since late last year. The limit he got was IDR 14,5 million. With that limit, he bought a camera mirrorless for IDR 5 million, 2,95% flat interest and 1 year tenor. Buy toys for children, even pulses are also purchased through the application.

Just like Dhimas, Lukman reasoned that shopping for necessities was simpler because he only paid all his bills once. You don't have to spend "printed money" every day.

"When everything is paid, it becomes simpler. The interest is also much lighter. If you pay before the due date, you can't get interest."

Potential KTA online

Dhimas and Lukman's experience can provide an overview of the condition of Unsecured Loans (KTA) products which are increasingly reaching various segments of society thanks to technology provider companies, although not from financial services companies. Akulaku and Kredivo are two of the many fintech startup players in Indonesia who are cultivating the potential of smartphone-based KTA products.

If it is likened to the KTA product they have developed, it is like a virtual credit card, you can buy anything at online stores at any time according to their respective limits. Just pay the bill through your bank account. Not much different from the experience for credit card holders.

This kind of experience is what these players want to give to all Indonesian people. Institute for Development of Economics and Finance (Indef) economist Bhima Yudhistira said the online KTA market is still very wide, especially in the urban middle class.

Consumptive culture, such as the purchase of electronic goods and fashion, triggers the increasing demand for KTA. There are now various types of KTA debtors, for segments with poor credit records usually avoid banks and choose fintech startups.

Those who are lazy to deal with bank administration also tend to prefer fintech startups, especially the easier and faster procedures. Even though banks now have online submission facilities, considering that banks are a tightly regulated industry, there are still many rules that must be met.

"This means that there are consequences for the ease and speed of the KTA application process from fintech players, which must be paid with higher interest or high late fees. So in other words, banks that enter online KTA do not compete directly with fintech. The market is still different," Bhima said.

Tokopedia, as one of the largest marketplace services, wants to support strengthening the purchasing power of the Indonesian people. One of them is the development of digital financial products and services such as KTA which has been launched since last year.

Placing itself as a platform, Tokopedia provides various choices of KTA from these service provider partners and chooses programs according to Tokopedia users. Whole process approval and billing is carried out entirely by the product provider partner in question. Tokopedia is only a marketing distribution channel.

"We see great potential in expanding the use of financial products and services. Specifically for online KTA, the development potential is still very large. Moreover, currently KTA is one of the favorite types of loans among Tokopedia users," explained Head of Fintech Tokopedia Samuel Sentana.

Community conditions

Online KTA players also spoke up when discussing their business potential. Co-Founder and CEO Kredivo Akshay Garg said Indonesia still faces a gap in terms of credit card penetration. Only 3,2% of Indonesians with credit cards out of nearly 260 million population.

There are 70 -80 million middle class segments that are eligible for loans but are rejected by banks because of their job profiles. This is a huge gap for online-based KTA players to fill.

Supporting Akshay's statement, TunaiKita COO Andry Huzain added that based on OJK data, the need for national loans reaches Rp. 1.600 trillionHowever, only around Rp600 trillion has been served through banks.

TunaiKita is a joint venture between WeCash Southeast Asia, JAS Kapital, and Kresna Usaha Kreatif (KUK). In obtaining loans, TunaiKita cooperates through a p2p lending scheme with investors from conventional banks and financial institutions that have not been served by these institutions.

"Fintech-based funding is present as an alternative to reach people who are not served by conventional funding instruments, so that it becomes an important component in efforts to increase financial inclusion nationally," said Andry.

The imbalance between the potential and realization of financing is also reflected in the contribution of e-commerce transactions last year of around $10 billion. Far compared to total retail transactions offline in Indonesia by $500 billion.

"The share of e-commerce is still 2% of offline retail. This is from the real market and a much bigger problem of financial inclusion to solve," added Cloud Tunai CEO Dino Setiawan.

Just like TunaiKita, Awan Tunai is also an online KTA player. In its business approach, Awan Tunai is more focused on providing installment facilities for customers when shopping at partnered offline stores/agents, such as workshops, dairy shops, pharmacies, HP shops, and building shops.

Well Kredivo, TunaiKita, CloudCash, and Akulaku are some of the many fintech lending startups engaged in application-based KTA products.

Just look at the Play Store and App Store with the search keywords "loan", "money", "quick", "fast", "cash", and so on. Undoubtedly, you will find various applications that provide online KTA services.

Each company issued various magic tricks to attract customers with various offers. Whether it's a short verification process, it's only enough to upload an ID card, you can get low interest facilities, high limits, and so on.

The term KTA actually also exists in banking and financial institutions finance, usually in often better known as multipurpose credit. This product can be used for consumption needs, home renovations, pilgrimages, school fees, and more.

From OJK data, the performance of multipurpose financing is finance reached Rp252,83 trillion as of May 2018 or an increase of 8,36% year-on-year (yoy). This financing dominates compared to other types, such as investment financing of IDR 126,26 trillion and working capital financing of IDR 23,36 trillion.

Unfortunately, the OJK does not release detailed data about bad credit in multipurpose. Overall NPL in multifinance is 3,12% in the same period.

For the banking industry, citing BI data, the performance of multipurpose loans amounted to Rp491,49 trillion, up 13,88% yoy as of April 2018. In this sector alone, bad loans were 1,09%, up slightly compared to 0,99% in the previous month.

KTA product penetration survey

In collaboration with JakPat, DailySocial conducted a brief survey related to the penetration of KTA products on 1938 respondents in Indonesia, the majority of whom were aged 20-25 years (37,77%) and 26-29 (23,43%).

The results are quite interesting, 55,37% of respondents said that they had shopped online with the installment feature without collateral. Those who never did, they argued that it was burdensome (38,5%), usury (26,01%), the amount of interest (22,31%) and others (13,18%).

Respondents who stated that they had used this feature claimed to have used this feature about 1-3 times (83,13%). There are also those who have used it between 3-10 times (13,23%) and more than 10 times (3,63%). They use it to buy handphone (52,56%), electronic goods (26,37%), property (12,4%), luxury goods (2,24%), and others (6,43%).

For other answer options, there are those who answer to buy plane tickets, clothes, business capital, pay debts, medical costs, vehicles, PLN credit, and so on. Respondents stated that the reasons for taking this installment product were lighter (50,89%), the same (33,83%), burdensome (14,54%), and others (0,75%).

In general, respondents said the existing KTA application process was simpler (83,69%), the rest answered complicated (16,31%). When asked for considerations when choosing a company where to take installments, the majority were due to lower interest offers (31,13%), attractive promotions (27,59%), other people's references (23,95%), company reputation (15,94 %), and others (1,4%).

Regarding the companies that respondents choose to take the product, the majority of respondents choose banks (62,63%), flexible depending on offer (21,81%), startup lending (8,48%), non-bank institutions (7,08%).

Finally, respondents felt they were most familiar with or had used a loan from Akulaku (57,5%), Kredivo (44,55%), Home Credit (44,45%), UangTeman (34,4%), TunaiKita (31,8%), Smart Credit (29,54%), and the rest from companies such as Rupiah Fund, Cloud Cash, Go Rupiah, Go Loans, We Cash, and so on.

From the results of this survey, it can be concluded that the respondents are quite familiar with KTA products. It can be seen from their response that the submission procedure is simple. However, respondents still trust banks as lending institutions, even though they are still considering the option of choosing a company outside the bank because they will revisit the offers offered.

Risk mitigation

Profiles of several online KTA service providers

The online KTA product with all its conveniences also saves the host company a sense of anxiety if its customers fail to pay their debts in the future. It is obligatory for the organizers to mitigate the business by developing a system credit scoring themselves use the latest technology to ensure that the customers they lend are the right people.

Moreover, they are not financial service institutions that are required by the OJK to be registered as reporting on the Financial Information Service System (SLIK) or known as OJK Checking (formerly BI Checking). SLIK is an important infrastructure in the financial industry for risk mitigation, especially credit risk so as to reduce the level of bad loans.

SLIK stores various accurate data, including installment data such as Telkom, PLN, PDAM, including BPJS. Then the name of the biological mother, the name of the wife (before none), NPWP, loan facilities, collateral, guarantees, financial information. Income information, spouse data, more detailed business entity financial information and other information.

Mitigation of this risk is one of the efforts of the implementing companies to reduce bad loans that are likely to occur in the future. In BI regulations, banks are required to maintain a net bad debt ratio (NPL nice) below 5%. This ratio is also a reference for operators in showing the quality of distribution, especially when there are several providers who receive loan funds from banks or other providers finance.

Andry Huzain explained that TunaiKita uses lending robots which combines the principles of finance, mobile technology, big dataand machine learning to evaluate credit and approve loans more quickly, with quality, and work 24/7.

Lending robots It is able to manage risks in lending in a transparent and efficient manner. The credit application process can be completed in seconds if the customer does have high creditworthiness. The loan value offered starts from IDR 500 thousand to IDR 20 million with a tenor of 10 days to 6 months. For daily loans, the interest starts at 0,95% per day.

Since its establishment last year until Q1 2018, TunaiKita has disbursed loans of Rp700 billion and is targeting a monthly growth of 25%-30% every month.

Meanwhile, from the side Kredivo, the company offers fast service, from downloading the application to the approval process in less than 5 minutes. Process checkout shopping takes just two clicks, making it easier for consumers and reducing cart abandonment rates for merchants.

Akshay Garg said the company developed a credit scoring and digital identity verification system that qualifies as a potential user based on thousands of different variables. There is a combination of machine learning and statistical methodologies for mining data across multiple sources, including mobile phones, social graphs, e-commerce accounts, bank accounts, locations, and so on.

"This method aims to eliminate most of the fake data, as well as bad borrowers. There are periodic notifications to help users stay aware of their due dates."

Kredivo in collaboration with more than 200 e-commerce companies engaged in the marketplace, gadgets & electronics, pulses, fashion, home appliances, services, travel & hotels, lifestyle, and many more. Akshay claims that every month he claims the overall business growth is growing by 20%.

On the previous occasion, Akshay targeted loan disbursement Kredivo of US$150 million (more than Rp2 trillion) so far this year, a fourfold increase compared to the previous US$40 million (around Rp500 billion). Customer Kredivo revealed to have touched the figure of about 500 thousand people and is targeted to penetrate 1 million.

Last year Kredivo recorded as many as 20-25 thousand transactions in e-commerce every day. It is hoped that this year it can penetrate 150 thousand-200 thousand transactions, along with the increasing number of e-commerce partners Kredivo.

Cloud Cash does not want to lose. Given the company's different business approach, his party chose not to enter the e-commerce market because Dino Setiawan assessed that the offline retail market was much larger because it also included SMEs. In risk mitigation, the company works with banks to assess credit, while AwanTunai provides the data.

"We are using our technology to help banks access the 85% of Indonesians they currently cannot serve. The banks are very good at managing risk, while fintechs have the power to process loans at very low fees."

The loan nominal that can be applied for is between Rp. 1,5 million to Rp. 3 million, with a tenor of 9 months and interest starting from 3%. Until now, Cloud Tunai has distributed to more than 10 thousand customers from around 150 thousand applications that submitted. The value of financing that has been disbursed is more than Rp. 20 billion with NPL which is always maintained below 5% according to the industry.

Currently, Awan Tunai's total retail partners have more than two thousand stores spread across Jabodetabek. The company obtained funding sources from financial institutions, one of which was KreditPlus for $30 million.

In terms of industry, OJK noted that until the middle of this year, The NPL of fintech companies is in the range of 0,58%. This figure is down compared to January 2018 at the level of 1%. This decline is claimed to be due to artificial intelligence (AI) technology which strictly selects prospective borrowers because a lot of data is received and managed.

The aftermath of the Rupiah Plus

The story of Rupiah Plus, which has been in the spotlight over the past few weeks because of the "unusual" way of collecting debt from its customers who are in arrears, has moved associations and regulators to calm the public.

Rupiah Plus is a company that provides online KTA products, starting from Rp. 800 thousand to Rp. 1,5 million with a maturity period of 14 days. Late payments will be subject to a fine of 2% per day.

The latest news (13/7), OJK has issued a sanction in the form of suspending the business license process for three months to Rupiah Plus, effective since early July. As for the status of the company, it just has a certificate of registration as a p2p lending company.

OJK's Director of Licensing Regulation and Fintech Supervision Hendrikus Passagi said the impact of the sanctions was that the company's plans to be carried out once they received permits had to be postponed. They must improve the company's internal and other requirements requested by OJK.

"We have evaluated, the organizers already have a SOP that spiritits similar to SE OJK. But its employees and third parties do not act according to the SOP. This means that there are weak internal control errors, sanctions will still be there for them," said Hendrikus, Friday (13/7).

On the other hand, OJK also found fault with Rupiah Plus debtors. The debtor showed his intention to avoid paying the bill by deactivating his cell phone number, making it difficult to contact him. According to Hendrikus, the best solution for the organizers is to report it to the OJK because there is already bad faith here, not by using personal data without approval.

"We try to look at it from two sides, be a fair and transparent provider, the confidentiality of consumer data must be maintained. So the middle way is to report it to the OJK or to the association, collect data on problematic debtors in one data center so that it is recorded."

Whether the sanctions from the OJK can be said to create a deterrent effect or not. Clearly displayed on the Rupiah Plus website in the Help Center, Rupiah Plus promises not to disclose customer personal information to third parties without your consent. However, this promise will be broken if the customer is in arrears and needs services. Is this statement in line with OJK rules?

Not only OJK can impose sanctions, so can associations. According to the Legal Coordinator of the Fintech Lending Division Aftech, Chandra Kusuma, the association can issue a warning letter to Rupiah Plus even to the point of being expelled from the association's membership.

"People's trust needs to be maintained. So far the industry highly trusted by the public and proven to have contributed to the country's economy. We are very confident that consumers will continue to believe in the fintech business sector, there are still many other business actors who are good, obey the law, and are ethical," said Chandra.

Bhima Yudhistira also added that fintech can easily distribute credit to debtors through technology. But for billing is usually heavy and expensive, finally do outsourced to a third party, similar to what happened in multifinance. Finally, it creates a conflict between the debtor and the debtor debt collectors.

"Here, the OJK cannot remain silent. Not because of fintech and then the supervision related to customers is relaxed. Or if a complaint has been processed, it is not wise," he said.

When they return to the story of Dhimas and Lukman, they admit that the bill payment process is very easy. Dhimas, for example, he can pay bills through virtual accounts which can be paid in any bank. Lukman also always tries to pay on time so that no interest is charged at all if he pays under 30 days.

What is the billing procedure for fintech startups actually like? Tunai Kita, for example, only charges the contact number provided by the customer. The entire process is carried out by the Tunai Kita team and does not involve third parties.

"Our procedures follow OJK regulations regarding debt collection applied in banks and financial institutions," said Andry Huzain.

Kredivo also agree. Akshay Garg wants Kredivo running as a company for the long term. For this reason, the company highly upholds strict professional standards.

"Our app rating which represents the satisfaction index of satisfaction is one of the highest in the industry [4,5 stars on the Play Store and 4,7 on the App Store]," explains Akshay.

Money Friends Founder and CEO Aidil Zulkifli added, if there are customers whose bad loans are more than 60 days from the due date, they will only use the services of a certified third party from APPI (Association of Indonesian Financing Companies). Under this period, the company continues to use SOPs according to the applicable standards at the OJK.

"The due date in Uang Teman starts from 10-30 days after the billing date, the calculation is daily interest. If it's more than 60 days, we will use the services of a certified third party. track record partner with BUKU IV bank. If it fails, thenwrite off, so we keep watch image customers," said Aidil.

Aidil claims that with this billing method, the company has managed to keep the NPL ratio under the range of 3%. Currently, the company has disbursed loans of more than Rp500 billion to around 50 thousand customers. Uang Teman hopes that this year it can reach Rp1 trillion for its loan distribution.

What Cloud Cash does is also not much different. It's just that Dino Setiawan emphasized that the industry is still a new industry. To operate on a large scale, it is clear that companies must conform to regulations collections which has existed.

"New industries, especially those looking for new innovations, will definitely try various things. Obviously, if there is a violation, it needs to be corrected, or there is something bad that has not been prohibited by regulations, yes, mechanisms such as media or reporting to associations or regulators need to be carried out. Consequences If you don't pay the loan, there will be, wherever it is," explained Dino.

Aftech preventive measures

Inauguration of the 2018 Fintech Fair event in Jakarta

After the Rupiah Plus incident, Aftech intensified in formalizing the "Guidelines for Responsible Online Lending and Borrowing Service Behavior" document which was delayed from the ratification schedule that was supposed to be in April 2018.

Aftech's Director of Public Policy, Ajisatria Suleiman, said that the document had actually been informally ratified for members of the association. OJK has also given its blessing. However, his party wants to be formalized by forming an ethics committee consisting of three independent advocates.

"Next week [the third week of July] we will appoint an ethics committee board, we already have the names of the advocates. Then we have also created a special coworking group for daily loans. They will standardize the billing SOP, all of which we have met with 18 members," said Aji, Friday (13/7).

Next the association has also set pilot project for data sharing started with eight fintech companies. Sharing This data is meant to check the list blacklist and fraud debtor. This is similar to the SLIK that has been applied in the financial services industry.

"We want all companies to participate, but this is a sensitive issue, so we start with what we want first. Now the system is still being formed, but there is already a PIC, Mr. Izak Jenie."

Smarter give data access

Basically any application that has been downloaded on a smartphone, there is digital data that has been taken by the application development company. The digital data can be used for credit scoring, read user habits, verify data and more.

All new data can be retrieved by the application owner when the user gets a question, asking the user to provide access to the contact list, SMS, location, photos/documents, camera, internet connection, smartphone IMEI number, and call history. Then answer "yes" from pop-up The.

"When using a smartphone and using any application, there will be questions asking for permission to open access to your smartphone. When you select Yes, your data will move to the owner of the application. You must be aware that your digital data has moved, it's up to you what to do. So don't it is thought that only online fintechs are taking data," said Hendrikus Passagi.

In other words, continued Hendrikus, what Rupiah Plus is doing is also being done by other fintech companies and all applications in general. It's just that there was an internal error in Rupiah Plus which misused the user's contact list for billing needs.

DailySocial trying to compare and describe what data access various fintech applications ask for to their users. To be fair, we only compare between applications that run on online KTA products. There is Kredivo, Akulaku, Cash Cloud, TunaiKita, Rupiah Plus, and Friends Money.

Personal data of users requested by online KTA service providers

In conclusion, the six applications in detail request user digital data information, ranging from device information and application activity, call history, reading user contacts, sending and viewing SMS messages, rooms, photos and documents both on the device and externally, to the Wi-Fi connection used. .

But a little different, Akulaku and Rupiah Plus also requires access to the microphone on the device. Kredivo, Cloud Tunai, and TunaiKita do not request such access. Then, just Kredivo which requires access to the calendar. Other apps don't ask for that access.

In the end, the convenience offered by online KTA products should not let you down. Stay critical when choosing a loan, don't let your guard down to get caught up in "fake" services. Must be responsible for all risks that have been selected and orderly pay the installments.

When downloading a new app, pay attention to what data the app owner is asking for. Data theft is now getting easier, it can even go unnoticed. Service owners must also be more careful in storing user digital data, so that it does not fall to irresponsible parties.

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