Uberising Banks

WHEN JAYAMIN PELPOLA RETURNED TO SRI LANKA IN 2017 TO START A FIN TECH VENTURE, few believed the Harvard alumnus and former Goldman Sachs investment banker would make it. However a year since launching Moneyworkz. lk in 2018, an online banking aggregator that uses data analytics to match customers with banking products, Pelpola has achieved success few have.

Moneyworkz is profitable and has positive cash flow, rare for most online ventures. Its last funding round valued it at over a Rs1 billion.
Moneyworkz.lk is a marketplace for loans. Potential borrowers can compare interest rates and terms offered by banks and finance companies in Sri Lanka on one digital platform. Anyone can apply for a loan in a few minutes; the bank or finance company to which they applied will collect the documents in a couple of days from the applicant before processing the loan, all free of charge for the borrower.

MoneyWorkz is attempting to achieve in finance what Uber did for ride-hailing. Uber has put more cars on the streets and hailing a ride is a breeze. The online ride-hailing firm, and others like it, have also driven down fares. As a result, People in big cities around the world are now choosing not to own cars. Sri Lanka’s retail lending tops Rs200 billion in gross annual disbursements Pelpola estimates, and Moneyworkz has tapped five percent of that. Over 45,000 people have successfully applied for personal loans, leases, small business loans, home loans and credit cards via the online aggregator.

Moneyworkz earns fees for loan and credit card leads generated to banks, or on the number of successful applications. However, Pelpola is cagey about revenue except to say that the company is now profitable and cash flow positive. He estimates that banks save up to Rs20,000 for every loan they issue via Moneyworkz. “We aim to double market share in the next couple of years. That’s a massive opportunity,” Pelpola says. He forecasts revenue will treble over that time.

Moneyworkz’ studio-like office is tucked away in a maze of by-lanes in Bambalapitiya. Natural light fills the office. It has a small meeting table in one corner opposite a pantry. Workspaces and a lounge area occupy the rest of the studio.

“I sit with every team, and everywhere,” Pelpola laughs, unconsciously glancing as if to identify a spot to get the day’s work done after the interview.

Usually affable, there was a moment when he looked dead serious. “We are democratising banking and finance, and building the future economy,” Pelpola says with audacity.

In a market where people often don’t know the interest rates their savings accounts yield, Moneyworkz lists the costs of loans, leases and credit cards of nine banks and five finance companies.

Moneyworkz helps banks discover and reach clients more efficiently. Pelpola says it is three times cheaper and more efficient in terms of cost of reach and conversion rates, compared to the physical branch model or generic digital channels.

On their website, Moneyworkz.lk, a potential borrower submits basic information, such as income, where they work, and education level. Its algorithm will recommend several loan products that best suit the potential borrower. A potential borrower selects one and clicks ‘apply’. A list of the required documentation is then dispayed. The banks and finance companies partnering with Moneyworkz have undertaken to call and visit applicants within two days to collect the loan documents. Customers can then track their loan applications on Moneyworkz.lk much like e-commerce sites allow shipment tracking.

Sri Lanka is overbanked and yet struggles with financial inclusivity. It has 30 bank branches per 100,000 people and when finance company branches are added, the number increases to 37. This is higher than 24 in rich countries. According to the World Bank, 50% of the adult population in high-income countries have bank accounts and for Sri Lanka, it’s 30%.
“Low financial inclusivity is really a matching problem. Banking is less accessible to the average consumer. It’s too complicated and banks use outdated credit evaluation methods,” Pelpola says. Despite a wide range of banking products, people are not discovering the financial products that best suit their needs. Information is also difficult to compare, two problems Moneyworkz is solving.

MONEYWORKZ A YEAR ON

  • 200,000+ – Number of visitors to Moneyworkz.lk
  • 45,000+ – Customers who successfully applied for and received loan disbursements, credit cards
  • > 20% – Moneyworkz’s conversion rate. Global ecommerce’s average conversion rate is less than 3%
  • Rs1B – Moneyworkz’ valuation
  • Rs8Bn – Value of loans via Moneyworkz, which is about 4% of the Rs200Bn retail lending market
  • 40% – Loan approval rate via Moneyworkz, double the industry average of 18%

Around 20% of them live in the once-war torn North and East, another 20% in semi-urban areas like Galle, Kurunegala and Kandy, and 10% in rural areas but demonstrating upward mobility in economic status.

“There is an emerging middle-class outside of the metros and cities. When we started, the average income of Moneyworkz loan applicants was Rs50,000 and this has increased to Rs100,000 by 2019,” Pelpola says.

Globally, banks fret about the threat posed by fintechs to their traditional brick-and-mortar business model. Many banks are investing in digital platforms or acquiring upstart fintechs. For Pelpola, ability to deliver on Moneyworkz’ vision as a fintech depends on mutual collaboration with entrenched financial entities.

“We are building the future economy on what I call Fintech 2.0,” Pelpola explains. According to him Fintech 1.0 emerged to disrupt traditional finance.

Data is everything. It is the reason why Moneyworkz is successful. Increasing visitors to a website is hard enough; making them carry out the intended transactions in a new way requires behavioural change. Online retailers obsess about conversion rates or how many of their website visitors actually purchase something.

“Our conversion rate is over 20%. This is an achievement only a few online startups have seen here, or for that matter anywhere else,” Pelpola says. Despite the explosion in online retail, global e-commerce conversion rates averaged 2.7% in the first quarter of 2019, according to Statista.
“Our high conversion is due to a data reliant algorithm that efficiently matches people to banking products that best suit their needs,” Pelpola says.

Commercial Bank, Hatton National, Nations Trust, Seylan and NDB Bank and finance companies People’s Leasing and Finance, HNB Finance and Softlogic Finance partner with Moneyworkz. Foreign banks here HSBC and Standard Chartered are also on board, as are international payment networks Visa and MasterCard. Moneyworkz’s conversion rates are two to three times higher than the online banking platforms of these banks, Pelpola says. Banks with limited reach outside Colombo such as foreign banks HSBC and Standard Chartered are acquiring new customers thanks to the fintech. Impressed with Moneyworkz, they have invited Pelpola to develop a version for other markets they operate in. Even for banks with extensive islandwide branch networks, Moneyworkz is acquiring new customers for them at half the acquisition and communication costs, Pelpola says.

In 2020, the fintech will launch supplementary services to help banks manage overall digital leads and to enhance loan collections.

Excluding credit cards, Moneyworkz has helped banks disburse around Rs8 billion since launching retail loans in June 2019. Three-quarters of this comprises small business loans or leases for commercial vehicles.

“Most of these are outside the Western Province. This shows our value proposition is benefitting both the consumer and the financial institutions.”

Democratising finance is necessary for Sri Lanka to reach the next level of development, Pelpola believes. But there are constraints in the financial system that Moneyworkz wants to unbundle.

“We’ve cracked the code on the impossible trinity, in financial innovation,” Pelpola says. Not many financial innovations can claim all three things: improved fairness in access to finance; faster processing and disbursement of loans; and lower interest rates and fees for the customers. At best, some may achieve two of these, but not all three, he says. It’s faster: customers can compare more than 200 loan products, 50 vehicle leases, 100 credit cards, offers and discounts, all in one place. Applying for a traditional loan, from discovering options to making an application and finally receiving your loan, can take up to 25 days. Moneyworkz has reduced the entire cycle to three days.

Pelpola’s team developed Moneyworkz from scratch, consulting potential users before each development and test phase. “We developed over several bursts of short sprints. This ensured we were building something usable and effective very fast.” Gaurav Jain, a Harvard Business School alumnus like Pelpola, is a notable member of Moneyworkz’s advisory board. He currently heads the product monetization team at Facebook Inc, USA. Jain previously led product marketing and strategy at eBay. Another Harvard alumnus, Hari Balkrishna is also on the advisory board. He is a vice president at asset management firm T. Rowe Price, UK.

The site has attracted 250,000 unique visitors without conventional ad campaigns but Pelpola is more focused on conversion rates and how many consumers get a product matched by Moneyworkz. Sri Lanka remains the priority, but in 2020 he hopes to enter the Philippines, a 100 million population market that shares similar challenges.

“Efficient discovery and the middle-class getting access to finance are problems there just like in Sri Lanka. With our solutions, and the scale, returns will be immense for everyone; Moneyworkz, banks and borrowers,” Pelpola says.

Indonesia is another market on Pelpola’s radar. He wants to tweak Moneyworkz to include real estate and mutual funds there. These two asset classes are too complicated for Sri Lanka’s retail market, for now, he says.

Devan Daniel is the Deputy Editor at Echelon, Economynext’s sister magazine