Interviewed By Foo Boon Ping
Benedicto Haryono, co-founder and CEO of Koinworks discussed how the neobank aims to help underserved businesses and entrepreneurs manage their finances and financing. He also discussed the need for Indonesia to improve its data management capabilities, and the struggle to gain valuable data amid industry incumbents withholding their data.
In April, Koinworks launched its neo banking feature, Neo Card, in partnership with Mastercard and Bank Indonesia. It will be made available primarily to businesses and entrepreneurs who are struggling to have their loans approved by large banks and fintechs. Neo Card will provide business owners a virtual card from Mastercard that is connected to BNI accounts. Customers can then top up their accounts and use the card for various transactions, including buying raw materials and paying for online ads. Neo Card also allows users to generate invoices, financial statements, and personal links to receive payments, and apply for loans through the app. Koinworks is also committed to helping SMEs throughout their digital transformation journey, as well as creating a positive impact on the SME industry.
Here is the transcript:
Foo Boon Ping (BP): I'm very happy to meet with the CEO and co-founder of one of the many fintechs in Indonesia. This particular fintech serves the small and medium sized enterprises in the country, the name is Koinworks. Recently it also launched a digital-only bank called Neo. I'm very happy to meet with Pak Benedicto Haryono, Ben for short. I'm interested to know in this very competetive market space, how are you differentiating yourself and how would a digital only SME bank compete with more established traditional banks?
Benedicto Haryono (BH): Koinworks is the first company I founded actively, I think prior to this, I've only been a passive investor. Koinworks is the first personal project I invested in, spent half my life here. Notably, we've only been here for, five years, six years now. But I think it felt way longer than that, because of the amount of effort and intensity of the whole journey. What pushed us to found Koinworks, with my co-founder Will (Willy Arifin), we went way back to college times.
That's when I met up with him. We got together and have similar passions. And we know we both have entrepreneurial aspirations. It took us a few years. We built up our own experiences, went our own ways. Then we reached out and came back to Jakarta. We both are interested in tech. And we looked at a few models. But what really pulled us into fintech is there's so much fit in terms of the opportunity, and also the impact that we can provide to everybody in Indonesia. And that's why Koinworks’ mission statement has always been more about the impact side of it. We want to enable people to realise their dreams through financial empowerment. And that's why Koinworks from day one, we've mostly focused on the productive segments. If you look at marketplace lending in Indonesia. It started out with a lot more players in the productive segments. The volume quickly went up on the consumer segments side. Because Indonesia has always been a very consumer driven economy. But we stayed clear from it because we think that given the financial literacy in Indonesia, it can be more harmful than helpful in a lot of times. We want to stay in really purposes where we think there's a lot of value add and hence that's why the name, Koinworks was given. Koinworks, the “Koin” is an abbreviation of investment community in Bahasa is “komunitas investasi”. And the “works” is both a verb and noun to reflect the value added nature of Koinworks that we want to create value for all the stakeholders that are with us within an ecosystem that involves lenders and borrowers, us, our investors, shareholders. Everybody has to have benefit when they join the Koinworks ecosystem.
BP: What differentiates Koinworks from this other competitors? And why go into a neobank?
BH: What really differentiates us is our unique mission. And our insistence on that mission. Way back when players were investing Investree, Modalku and Amartha we all have carved out our own niches a little. Amartha is really focused on financial inclusion and the rural areas. Their loan sizes are $1,000 and below. Modalku and Investree are more on the upper segment of the SME bracket, so they're really near bankable and their ticket sizes are more than IDR 1 billion ($68,600), typically. We are focused more on the middle segment. In that regard, we don't really focus on building a GMV (gross merchandise value) driven track record.
We are more into, how many people’s lives Have we impacted? How many people that we have changed? How many SMEs have we helped out? And how they're faring? We do keep track of our financial matrices. But it's more that if you're looking at the upper segment, they already have certain bank facilities. And what we have to give them we have to compete with the banks which means that we are looking at the middle segment, then we are more into businesses, which are not micro, they have some track record. They're growing, but they're not exactly bankable either. In that space, we do have quite a bit of a margin play, but also in terms of the cost of servicing the customers is not as high as the micro market. So, we kind of like our niche. And we always focus more on businesses that have digital footprints. Because we think offline businesses in the current environment. Well, maybe not current environment, say, 2 to 4 years ago, it's very difficult for us to serve them.
This brings us to the point of why we are opening the neobank. One, it is aligned to our mission. First of all, is that we'd like to cater to everybody, not just a small portion of SMEs in a country. Towards that mission, we have found in the last five years of doing the business is that we are only approving a small chunk of the of the borrowers who come to us, 10% or less, all the borrowers that come in, for a few reasons. One, is that the borrower might not be qualified for credit right now, they might not have enough digital footprint at this point of time. Or they might not always need a loan at every given time of their business cycle. So, going to a neobank we're expanding our service. And it does allow people to build track records with us. They can use our transaction service or data services. And for us to also I would say, accelerate their buildup in terms of their digital footprints because in Indonesia, the data ecosystem is very fragmented. And the data is not in full control of the customers as well. So, for us to access this data. Even though COVID has accelerated the digital onboarding. It's still difficult, because the government holds some pieces of the data, Gojek holds some piece of the data, Tokopedia holds some piece of data. Shoppee has it. But then the data is not easily shareable. Even when customers say please share the data with Koinworks, The government will just say we don't have that kind of system, we're not going to hand over my BPS data or income data to Koinworks. Because everybody sees that data as their data, not the customer's data. For us to get there, we have to create our own ecosystem that is much more within our control as well, while of course providing value to our customers. The concept of the neobank itself, is to make financial management become simpler for entrepreneurs, so that they have more time that they can spend on other things, marketing, sales, product creation, planning, even spending time with their family. The whole idea is simplifying, making it smarter for entrepreneurs to deal with the financial aspects of the business.
BP: By being on your bank, also, you provide a more comprehensive scope of products and surfaces, as you mentioned, to allow them to develop or to better manage the finances for the SMEs. To your point about one of your mission and hasn't changed from the beginning, is the focus on impact. So in that sense, you are similar in terms of mission to Amartha. How does that kind of relate to the investors that you attract for investors that are attracted to institutions that want to make impact their primary mission? Are they more keen or more open to kind of being like foundations, being philantrophic in nature? That line between impact and commercial.
BH: We have never attracted anyway, foundations, charity type of investor base. Most of them, even though they are impact, they will be looking into financial returns as well. We're looking for talent out of Singapore, high-level talents, data talents, we want to build it out of Singapore. And secondly, more into strategy, into innovation, into data science, although arguably, data science can actually work from anywhere they want. We have a Singapore hub, if you want to be based out of there. We also building a structure of Singapore, for our foreign financial institutions that come from the US, Europe, Japan, they are more comfortable with the Singapore regulatory landscape.