Can you please introduce yourself and share a bit more about how Finology started and what is the idea behind it?
I’m Jared, the co-founder at Finology. We started in 2017, but this is not my first company in Fintech. Prior to this, we started an online product aggregator in 2012. This was not too long after I had to get my first mortgage for a home in Malaysia.
Back then, we couldn’t really find much information on all the available mortgages in one place. I decided to start something and put everything on a website. We started by aggregating mortgage information and ran a blog on how to deal with creditors, ways to look for the best loan, how to apply for it, what’s the process, etc. It later grew into something else altogether.
We got invested into by a Malaysian media company (The Star Media Group) in 2013 who bought quite a significant stake in our company, and they wanted to take the company in the direction of media. However, we truly believe that an online lead generation channel will not solve the problem. Also, the banking and insurance industry weren’t exactly ready for digitalisation at that time—they would generate leads online and follow up with an offline process.
In 2016, we repurchased the stake in our company from The Star, and rebranded it with a new mission to make financial access seamless everywhere, by embedding those solutions in places where people need it.
Let’s rewind a bit. What is the problem that you’re solving?
In our part of the world, financial services such as loans and insurances used to be accessible only through a salesperson, bank branch, mortgage agent or insurance agent.
For example, if someone was to purchase a house or car, the first thing that comes to mind is what’s the loan amount that he/she could be eligible for. And in Malaysia, you first have to pay an earnest deposit and take a couple of days to deal with banks at their branches. Alternatively, a salesperson will send the loan applications on your behalf to several banks. Sometimes, after a long wait, you may even lose your deposit if you don’t qualify for your loan application.
By bringing the underwriting process to the point of need, customers can instantly begin a digital underwriting journey at the housing galleries or automotive showrooms. This would result in pre-approved loans on the same day itself.
Another example is in motorcycle insurance and road tax renewal. We used to go to the post office, take a number and wait in long queues. Sometimes, even after several visits, the auto insurance and road tax still cannot be renewed due to system issues.
The total cost of a motorcycle road tax in Malaysia under 150 CC would cost only about $0.50 USD, as most motorcyclists in Malaysia are part of the B40 group (Bottom-40) in terms of demographic income classification. It was not worth it for a private actor to solve this problem due to low margins.
At Finology, we decided that we’re going to solve this once for the entire industry. It can only be done online due to the need for infrastructure that supports dynamic pricing of insurances, risk evaluations, vehicle model, valuation, etc.
We took a couple of months to get the infrastructure up together with the APIs. It was the first website in Malaysia to do this and it started to take off. We apply the same concept to multiple financial products and services, such as mortgage loans, car loans, motor insurances, SME insurances, medical insurances, basically financial products that people need in their daily lives.
The APIs enable underwriting to be installed, so customers can get instant loan eligibilities, loan approvals, prices, quotations, insurance policy or contract issuances. Any distribution channel that is even marginally digitally enabled by integrating can start offering the same financial services to their user base with our APIs.
For financial services partners like banks and insurance companies who might find it too expensive to revamp their tech stack internally, they can also decide to just host it with us and make these products available to the public.
Are there no other companies doing what you do in Asia?
There are digital brokers who primarily sell products online on their own websites or apps. Instead, we focus a lot on our APIs, where some of these digital brokers themselves become our clients and distribution partners.
Furthermore, we don’t have a narrow focus on just loans, insurance, or others. We basically include any financial product that requires that kind of infrastructure. It helps that we already have the proprietary technology such as underwriting for both credit and insurance. A lot of the larger channel partners of ours who have never moved or sold financial products in the past, are moving decent volumes today within several months.
What’s your business model?
We make money two ways: One is where we charge the channel partners a tech enablement fee. For example, when they subscribe to our APIs, sometimes they would engage us to also do some customisation and implementation work. There are certain amounts of reliable revenue every month and year because of the subscription fees.
The other way is the traditional broking model, where we take a cut on every financial product that has been sold or served by the financial institutions.
Who are your customers?
We have three groups of customers. On the supply side it’s the financial services industry such as banks and insurance companies who want to improve their tech infrastructure or to sell and move products through our network.
The second group of customers are our channel partners who help to move or distribute the financial products such as property listing sites, property developers and real estate agents. For example, we have two of the largest property listing sites in Malaysia as customers.
The third and final group will be consumers themselves who want to get access to financial products at their point of need.
Have you reached the scale that you want?
We have not yet reached the scale that we are looking for sure. We need to grow the total transaction volumes by at least 10 times within the next three years for us to reach economies of scale. Currently, our tech enablement fees are coming in handy as we’re doing the implementations, giving us quite a lot of reliable revenue even before partners start to distribute products. Some partners are also requesting to license our technology to do it in-house instead of hosting it with us.
Are you focused only on Malaysia?
Yes. We are based in Kuala Lumpur, and most of our business is in Malaysia. However, since 2019 we started getting inquiries from other parts of the world. We also sold our technology to clients from five different countries in Asia. In 2020, we’ve set up a local office in Cambodia for broking purposes, as a licence of sorts is required. When the opportunity presents itself and if we think that it’s worth the start-up effort and cost, we will set up an entity over there and operate with local partners.
Any lessons learnt that you could share for potential entrepreneurs thinking about starting their own business?
I would say our journey has not been the fast and glorious kind—it has been much slower and more exploratory, and we constantly kept our heads down to progress. We’ve bootstrapped all the way to this point. And when you start on your journey, if your only motivation is to make a lot of money, then I would say this kind of a startup journey is not easy.
My motivations are a little bit different. Of course, there’s also a profit motive. But I started from a more modest background with personal problems in accessing financial solutions for my motorcycle, my housing loan, and my own family. We used to have debt collectors that come up to our family’s doorstep. Even back in 2010 when I started the blog on how to deal with creditors, it’s based on my family’s experience.
Depending on the kind of temperament you have, you have to choose the kind of journey that you go on. For us, we focus a lot more on adding value such as having patents behind some of our technology. It’s a slow burn, a long and patient journey to get to where we want to go.
Sometimes I have questions and doubt myself as an entrepreneur. Am I cut out for it? I don’t consider myself to have the kind of entrepreneurs’ mindset that we mostly read about or see in magazines and on social media.
You’re the Seedstars World 2020/2021 competition winner. How did you find the process and what does this award mean to you?
First off, it’s really good to feel some level of validation of what we’re doing. Myself personally, I’ve been going at it in one form or another, for eight years already—first with Loanstreet and now with Finology. I’m thankful for the process and opportunity that we had with Seedstars.
I think it’s a huge opportunity for entrepreneurs to go against the best companies and startups in the world over a 9- to 10-month programme. By pitching, validating, evolving, and competing, it will separate the wheat from the chaff. That validation that you’re doing something of value to society is a huge honour.
We hope that it accelerates and brings the much-needed attention to the kind of under-the-radar work that we’re doing. We’re seeing more and more inbound inquiries coming from channels that never had any business doing financial products and services. And when people come back and say that it really made a difference in their lives, it feels great.
What lies ahead for Finology for the rest of 2021 and beyond?
Seedstars has been a much-welcomed boost in attention to what we’re doing. We’re doubling down on our efforts to close some rounds of funding to help us power through all the way to 2024. We are looking to shore up the team and to hire more tech talents.
During the first Covid lockdown (Movement Control Order, MCO) in Malaysia, there were a lot of inbound inquiries from companies that were looking at ways to reinvent themselves and prepare for the future. We had a wave of implementations and onboarding during the first MCO. Now, with the 3rd round of MCO, I guess we are gearing up for another wave of inbound inquiries.
Do you have a favourite non-fiction or business book that you could recommend for entrepreneurs?
Two books—’Good to Great’ and ‘Built to Last’ by Jim Collins. I’ve read a decent amount, and these resonated with me the most. I view a company as an organism that must evolve with time to stay relevant and continue to provide value, so that it can constantly renew itself as necessary.
The ones where you build something fast, scale quickly, and then exit may work for some, but not for me.