What are the STRENGTH, WEAKNESSES, OPPORTUNITIES & THREATS of the Loan Service Market? What are my risks & mitigants? Strength
Created by: OLAMIDE D. GBADEBO
Modified on: Wed, 20 May, 2020 at 9:15 AM
- Technology or Innovation has come to disrupt the traditional ways of conducting financial transactions. Technology has disrupted the usual rigor of endless loan processes involved with the conventional loan approval processes; people want access to quick personal loan to meet their immediate and emergency needs. Aposhashamura knows that technology is evolving and there are continuous improvement opportunities. Such a good opportunity is the Peer-to-Peer Lending system. Aposhashamura is positioned to constantly implement and scaleup its technological needs in tandem with these forgoing changes. We know what it takes to build an upscale web and mobile applications that can provide excellent Peer-to-Peer Lending service delivery. We have identified the market needs, understands the Peer-to-Peer Lending Platform technology and tactically positioned ourselves to build a service platform that brings the two together.
- Enabling Government Policies. Financial regulators and policy makers are generally interested in promoting technology companies and solutions. Regulations in this context refer to the processes and procedures adopted within this segment of the financial industry in Nigeria, in order to oversee, regulate, monitor or control its activities. They define certain parameters within which FinTech should operate and subjects us to certain requirements, guidelines and/or restrictions aimed at promoting transparency between us and our customers, among others, while allowing for continuous innovation in the absence of a direct, harmonized, and cohesive regulation on FinTech in Nigeria.
CBN and NIBBS launched a regulatory sandbox for small companies titled 'Financial Industry Sandbox' to be coordinated by Financial Services Innovation Association of Nigeria under their supervision. The purpose of the sandbox is to enable innovation by allowing for experimentation and rapid cycles of adjustments in a contained environment without full compliance with all regulations. The Sandbox is empowering small companies, which we refer to as start-ups, innovators, technology companies and young Nigerians that have great ideas operate.
- Adequate Data Analysis. There are different third-party systems within the Financial Services Industry that validates information provided by a borrowers such as Credit Registry Bureaus who provide Credit History, Rating & Scoring, etc. Information provided by these systems are mostly enough to determine a borrower’s credit worthiness status & make a loan decision.
- User friendly Web & Mobile Application.
- Customer Experience
Our web portal and mobile application are user friendly; simple to use, fast, easy, secure, powerful and responsive. The site and mobile app are developed with tailor-made business processes that give our customers an amazing loan application experience on any device- phones, note pads, palm top, even desktop. The web and mobile App are fully secured against fraud & illegal entries.
- Investors Experience
The Aposhashamura Tenant Board (ATB), https://tenanportal.aposhashamura.com, is designed to exemplify seamless business process, with simple transparent transactional processes.
- A huge capital investment is needed to meet the ever-increasing market demands
- Risk factor associated with online loan services. Online loan services are challenged by two familiar risks.
- Risk of loan defaulters; usually, there is tendency of 1 out of every 10 loans go bad occasionally. However, Aposhashamura has devised a workable means and strategies to mitigate such frequent occurrences such as:
- Implement pre-approval credit checks on every customer before disposal to militate against unsuspected online fraudsters and their menace
- Loan is not availed to applicant with negative credit report or history report, no employment history, no phone no. or home address history on credit report, no loan.
- Borrowers who supply incoherent data that does not match data obtained during BVN checks are automatically declined
- Allowing borrower to climb the growth curve steadily. Loan offer increases as borrower repays previous loan as at when due
- Obtain applicant’s debit cards with not less than 9-month validity; Paystack Charge Authorization feature is programmed to check borrower’s bank account, minimum of four times daily, for availability of funds. Anytime the bank account is funded, the debit/credit card is automatically charged
- Scheduled reminder. Aposhashamura’s system initiates SMS & email reminders 7 days to loan expiration to prepare a borrower to fulfil obligations on loan due date
- Due Payables repaid in instalments. To reduce any borrower’s exposure to Aposhashamura per time, ‘Charge Authorization’ is programmed to ensure to deduct as low as N250 from a borrower’s bank account if the ‘Due Payable’ is not available in the borrower’s bank account at the time it checks. Infact, our system is built to check for 100%, 50%, 25%, 10%, and 5%, NGN500 or NGN250, of the due Payable, in that order.
- Apply ban. If a borrower defaults on the previous loan, the system only applies a 2 -day grace period & penalize the borrower based on the no. of days after due date. For example, if a borrower overdue on repayment by 10 days, the system takes 2 days off, the borrower will not be eligible to make a loan application, until 8 days after
- Inform borrower’s guarantor, sometimes Employer in cases of defaults. During sign up, borrower provides Aposhashamura with guarantor/employment information. Most loan recovery processes were successful because of the intervention of the guarantor/employer
- List loan defaulters on Credit Bureau Registry. The fear of tagging a person as defaulter on Credit Bureau Registry, which consequently have an adverse effect on credit reports/rating influences a borrower’s mindset to repay loan, even if it not immediately, but eventually
- If a borrower dies. The loan automatically becomes a bad loan
- Cybercrime. Technologically-based products are prone to cybercrime. Working out strategies to militate cyber related crimes is key, hence security is priority for Aposhashamura operations as online loan service business is a virtual venture where there are unsuspected dubious individuals. Aposhashamura will constantly scaleup its security infrastructure to curb and control this menace. The security features of the Aposhashamura system remains a trade secret which is necessary to avoid attacks.
- A dependence on third-party technology. Aposhashamura Payment Process & Data Validation Process is technologically dependent on the efficient service delivery of several third-party systems. This implies that any downtime or capacity issues experienced by these third parties will have great effect on the business and result in slow turn-around time and inconsistence business cycle. However, efforts are being made by Aposhashamura to make critical processes independent. Foe example, Aposhashamura is looking at becoming its own payment processor. This is one of development strategy, which we hope to achieve in nearest time possible.
The Advantage that Financial Technology will increase efficiencies behind the scenes. Investment in financial technology has since recorded increase in recent years. Much of these technologies lend itself to the path of financial institutions. Online lending platforms available today incorporate not only the ability to attract clients online, but also the capacity to quickly route applications to the appropriate person within an organization. They also allow for much greater efficiency in managing deal workflow, lender pipelines, and incoming financial data from business clients thereby facilitating quick application process. These tools significantly shorten loan turnaround time without sacrificing unique ability to customize each request to local market conditions and local credit approval.
Search Engine Optimization (SEO) targets Fin-Techs. While working online, if a search for “small personal loans” is conducted, it is very likely one will not see a Community Bank or Credit Union until page three or later. This is an area where alternative money lenders have taken over. In fact, Fin-Techs are capturing much of the business. To absorb our share of the market, Aposhashamura is enhancing its own market its Peer-to-Peer Lending.
Attract more customers through Education. Prospects ask for financing without really knowing what type of financing is needed. While we have had to decline many such loans because borrowers hardly understand why and what conditions would have to be in order to become credit-worthy. Our P2P Lending Platform has a unique opportunity to spend a little extra time with prospective clients through its many features. Help the borrowers to understand the conditions that exists per finance. Help them to understand our analysis and how it impacts loan decisions. We harness tools available to financial institutions today which allows us to help educate our market without crossing the line of offering consulting services. Most small borrowers, whether they realize it or not, have an informal advisory team.
Enabling Government Policies. Loosened Regulations could increase earnings for Aposhashamura & its Financiers, Investors & Lenders in the present and future. The CBN and NIBSS have a regulatory sandbox. While allowing for continuous innovation in the absence of a direct, harmonized, and cohesive regulation on FinTech in Nigeria, the purpose of the sandbox is to enable innovation by allowing for experimentation and rapid cycles of adjustments in a contained environment without full compliance with all regulations
- The Sheer Market Presence of Larger Institutions. Each quarter, we see more banks with over 10 billion Naira in assets and fewer below that number venturing into the online and mobile loan platform. This trend has been influenced by the boom in the loan service market activity since the recession. The largest five banks in Nigeria awakened to the online loan service industry assets. With those increase, it is easy to see how small scale per capital organizations can feel like David up against several Goliaths. Small-Scale Loan Service Company, however, maintain a very important role in the financial services industry in that it is closer & also interacts with the lower end of the market segment better. It’s just that the sheer gravitational pull of these giants can impact everything from pending regulations, to rates and services, etc.
- Alternative Lenders still impacting the market for small business loans. While a few of the alternative lenders took their punches during 2013 when the Fin-Techs market began to boom, the emerging industry is not going away. Regulatory scrutiny will, no doubt, have an impact in the years to come but online lenders will continue to thrive. Aposhashamura will soon open the small business loan category, known as Midi-Loan between 51,000 and 250,000 and creates products for different market segments regularly. We are a well-structured organization, with a robust technology system. We will outlast such regulatory scrutiny, since we have obtained and continually positioned to obtain more licenses and required approval from Accredited and Authorized Regulatory Institutions.
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