Large stacks of paper, multi-person committees, and thousand-strong physical branch networks – these are the current hallmarks of the Philippine financial landscape. All that paperwork, people, and concrete and yet potential applicants still take more than 30 days to get financing and small business owners still need to put up his or her property as collateral. What can be done to improve financial inclusion and the financial landscape in the Philippines?
By embracing the power of technology, First Circle is providing non-collateral business loans to small and medium business owners in as quick as 5 business days. Technology has enabled the company to serve hundreds of SMEs throughout the country through the following means:
Gone are the days when financial institutions had to spend hundreds of millions of pesos to construct branches to reach their customers. With the internet, potential customers, whether in cities of far-flung areas in the provinces, can now receive information of the various financing opportunities available in the market. As of writing, it has been two months since First Circle went nationwide and began serving customers throughout all 17 regions of the Philippines. Despite having a single office, First Circle has made nationwide coverage possible by embracing the power of the computer, smartphone and the internet. Customers can easily create an account on the First Circle website and continuously receive financing through their electronic gadgets.
Services at the fingertips
Remember the days when business owners had to rush to the bank to catch the 5pm closing-time? What if they were in the middle of a business deal? What if they were stuck in traffic? These concerns have been minimized as technology has created convenient methods for customers to interact with financial institutions. If in the past business owners needed to physically visit a branch to get a loan, nowadays customers can connect with an online platform. Whether hosted on the computer or smartphones, online applications enable business owners to perform financial transactions while staying in their offices. This frees up business owners’ time to be more productive at work.
Many Philippine companies have loads of data which remain unutilized. Take for example a local conglomerate which uses paper application forms. The information is read by a set of users and when these users leave the company, the knowledge is lost. By storing and digitizing information, First Circle can keep its data and pull them out of the database when they are needed. The company organizes and analyzes the data to better understand clients. With thousands of completed transactions, First Circle has learned about customers in ways such as character profiles, repayment attitudes, and industry-specific risks. This deeper analysis of customers enables the company to offer tailor-fitted non-collateral financing while maintaining manageable default rates.
Faster processing time
In the traditional banking world, several players are needed to process a loan application: a receiving branch, account manager, credit manager, credit investigation team, credit-committee, risk-scoring committee, and documentation team. All these persons play integral roles in completing a loan application. The more people involved however, the more time and cost are necessary. Now, with the use of software and automated credit models, know your-client processes and credit decisions are completed at a significantly faster time – from days to hours. This has cut down the month-long wait for customers to get funding. At the same time, as more processes are automated, cost is notably lowered. A machine can constantly process thousands of documents while achieving better results than a human. This ability to scale enables companies to serve more customers without passing on unnecessary additional costs.
As more and more financial institutions include technology into their services, Philippine business owners and Filipinos in general can expect to see a different financial environment in the near term. Convenience, speed, and personalization will become integral parts of local financial services and will improve the lives of Filipinos.
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Jaime Zulueta is a firm believer of the usage of technology to improve lives. He is the Credit Operations Manager of First Circle where he oversees daily risk operations. He obtained his MBA degree from Nanyang Technological University in Singapore and from Waseda University in Japan. He can be reached through firstname.lastname@example.org