Aboitiz Data Innovation (ADI), a unit of Filipino conglomerate Aboitiz Group, has developed a fintech lending platform that enables its in-house banks to serve SMEs. It plans to invite third-party banks to use the platform in a bid to create an independent business able to serve the entire region.
Guy Sheppard, chief operating officer for financial services at ADI in Singapore, says a recent pilot between ADI, affiliate Union Bank of the Philippines, and LBC Express marks the start of expanding internal capabilities to outside partners.
“We call it ‘Scoring as a Service’,” he said.
LBC Express is a logistics and delivery company in the Philippines. It in turn serves some 400,000 small- and medium-sized businesses with its parcels and delivery operations. Those end users often lack access to credit or basic financial services.
ADI has developed a credit scoring system based on alternative data, which it combines with more traditional financial assessments to provide insight into how likely these small companies are to repay on time.
This has been made possible by the sprawling nature of Aboitiz. Beneath the holding company reside more than 50 brands, most grouped within verticals that include power, finance, infrastructure, real estate, and food. These units hosted their own ‘digital transformation’ teams, with their own priorities.
ADI was established to consolidate these into a strategic business. Its first task was to leverage the heft of the group to accelerate digitalization at scale. For example, it was able to develop data tools to optimize procurement across the major business verticals.
This involves both a bigger data set – which vendors provide the best service, the best pricing, the most reliable products, etc – and an impartiality that helps make business decisions more rational, says Sheppard.
For example, procurement contracts are not meant to be awarded on personal relationships; a bank’s product pitch is not meant to be based on one manager’s commissions but to provide a holistic decision that benefits the group.
By building internal data-led capabilities, ADI has begun to introduce efficiencies across the group. It has since been rolling out new products that are designed to have relevance across Southeast Asia.
The first two projects have been on financial fraud detection, and on financial inclusion, both to support lenders that operate under the Aboitiz umbrella. ADI developed artificial intelligence to help UnionBank identify mules (collaborators) for fraudsters. And its AI has been put to use by UBX, the group’s digital bank, for its lending platform, SeekCap.
The focus this year has been on small-business financing, with LBC the first major client to use ADI services, rather than affiliate companies.
Sheppard says it expands the universe of SMEs and individuals that can qualify for banking services.
“Banks all say they want to expand their SME business,” Sheppard said. “But credit officers at a traditional bank run out of the number of SMEs they can lend to on an unsecured basis.” Because banks’ credit-assessment systems are roughly the same, if a business owner is rejected by one bank, she’s probably going to be rejected by the others. “We built a model out of those rejections,” Sheppard said.
ADI agglomerates over a thousand data points to augment traditional credit scoring. It chooses data points that make sense in a place like the Philippines. For example, relying on someone’s name to run a credit check doesn’t work well because many Filipinos share common surnames or have complicated naming traditions.
But what ADI has found works is scoring based on addresses, which are unique. Sheppard says this makes for a valuable screen: “Is a business located near an embassy? Or is next to a bicycle repair shop? How strong is the internet bandwidth in that location?”
He says since ADI began scoring borrowers this way, it has allowed its affiliated banks to increase their SME lending volumes by seven times over one year, while keeping non-performing loans below 10 percent.
Beyond LBC, he says ADI is now working with a Filipino tech company with a consumer-facing app, whose customers are small merchants that use the app to sell their wares. These level-2 end customers are under a traditional bank’s radar. ADI anonymizes their data, scores them, and ranks them. This creates a prospect list for lenders. UnionBank and UBX are now willing to make offers sight-unseen to the top-scoring mom-and-pops; ADI and the anchor merchant take a slice of the total loan sizes made on the platform.
Sheppard says the priority is to embed this platform in the Philippines before taking it to other Southeast Asian markets. In doing so, he wants to open it up to third-party digital banks. He says two of the five licensed banks (other than UBX) may be open to joining the platform.
“The multi-lender approach will ensure we remain independent, and provide an impartial score that gives clients the best offer,” Sheppard said.