Fintech Disruption in Financial Industry Enters a New Chapter

Asia Blockchain Review
September 10, 2019

With the recent advancements in big data analysis and artificial intelligence, as well as the progress achieved in various regulatory environments, the financial industry has entered a new chapter. Innovative banking in traditional financial institutions is offering new capabilities, such as using chatbots to analyze and target consumer behaviors, in order to better serve their needs. Meanwhile, fintech startups such as Singapore’s Validus Capital are proving viability in alternative financing via peer-to-peer (P2P) and peer-to-business (P2B) lending. 

Validus Capital promises to cater to the evolving constituents of an increasingly digital economy that no longer falls into the rigid parameters set by existing models. Catching up on some of the latest trends, we interviewed Sonal Jain, Chief Data Officer for Validus Capital, a digitally led lending platform for Small and Medium Enterprises (SMEs) to access short- and medium-term financing from institutional and accredited lenders. 

Asia Blockchain Review: Share with us the long-term vision for Validus. Where do you anticipate the most growth in the fintech industry, and how does Validus plan to capture this value as the needs of both lenders and borrowers evolve moving forward? 

Sonal Jain: Validus’ long-term vision is to drive financial inclusion by offering accessible working capital loans to growing SMEs across Southeast Asia (SEA). Our goal is to drive business financing of over S$1 billion and bring financing solutions to SMEs and beyond. 

With a technologically led digital bank strategy, Validus is well placed to leverage the latest virtual banking technologies and monitoring solutions. This includes data analytics, modern application stack, a cohesive infrastructure architecture, and microservices-based integration with mobile and web applications. 


ABR: What sets Validus apart in Singapore? What will be the key determinants of successful players in the emerging new landscape, created by the upcoming trends in technology & legal regulation? 

SJ: Validus is committed to accelerating financial inclusion among growing SMEs in SEA. One of the biggest differentiators that we have is the ability to form partnerships with the biggest and best corporates in the region, empowering SMEs with financing services. This builds awareness among the largest pools of funding, which in turn allows Validus to scale up faster than the competition, building better business communities and promoting inclusive growth among the region’s SMEs. 

As an experienced team well versed in the region, Validus is well equipped to leverage new technologies to provide working capital loans to growing SMEs. 

ABR: Tell us about the current environment for fintech in Singapore. In what ways is it ripe for disruption? 

SJ: All in all, the current environment in Singapore is experiencing disruption, and collective efforts are being taken to develop the workforce in emerging fintech industries. With regulatory initiatives like regular consultations with the Monetary Authority of Singapore (MAS) and the government’s SMART Nation campaign, I am confident that Singapore will continue to sustain its competitive edge, remaining a powerhouse economy in SEA. 


ABR: Are the fintech space and regulatory environment suited for lending to be provided to the ASEAN nations? In what ways could they be improved? 

SJ: In emerging ASEAN nations, we are seeing greater access to the Internet, as mobile penetration becomes increasingly prevalent. As a result, there is a burning desire to get more out of the fintech space. 

In order to bring this to fruition, the regulatory tone is one of enablement. Validus has witnessed regulators across ASEAN diligently surveying the landscapes and enacting regulation around fintech, often in consultation with key players. 

Nevertheless, isolated, negative incidents tend to create poor impressions of the industry as a whole, such as P2P lending in China, which cannot be compared to current market conditions in ASEAN. 

Desire from the market for new products, combined with the infrastructure to support it and alignment with government initiatives, has created an environment conducive to fintech-driven lending. 

ASEAN is a hotbed of innovation, and Validus is fintech driven. There’s a greater sense of comfort that we embrace innovation and flexibility that is in favor of financing SME growth and enablement. 

ABR: Why have you chosen to work in a peer-to-business setting, rather than inside the traditional financial institutions? 

SJ: I wanted to embark on a new learning journey, after my early years in American Express. Joining the nascent peer-to-business fintech industry at Validus was a natural career progression. 

For the past year, I have been heading the data and analytics functions at Validus Capital, working closely with my team on data-driven solutions for meeting the financing needs of SMEs in Singapore and the region. 

With my previous experience using data to drive decision making across the credit lifecycle, I jumped at the opportunity to contribute towards the SME lending space. 

SMEs are the backbone of every country. Yet, they remain an underserved segment of economies. I’m glad my work can better empower economic growth and spearhead financial inclusion across ASEAN. 

To overcome challenges, I work with roadmaps, which give clarity on where we want to be with our goal, and take steps towards reaching it. This has helped us achieve meaningful results that make financing more accessible. 


ABR: How do you reduce the risk exposure for your lenders and borrowers? 

SJ: Validus and most fintech-driven financing firms use data science to assess a borrower’s creditworthiness, such as integrating lending platforms with accounting software, which makes it easier and quicker for SMEs to streamline financing processes. This, in turn, facilitates faster loan approval. 

Unlike traditional bank loans, these options can be approved within 48 hours, as invoice financing solutions allow SMEs to present invoices to the lending platform and receive cash for almost 80% of their value. 

Once the invoice is paid up, SMEs can pay the platform back. Other invoice financing providers also have suppliers pay them back directly. By containing financial risks within regulatory parameters, the loan is executed in a compliant manner. 

With zero-collateral financing and affordable interest rates, Validus connects businesses to institutional and accredited investors quickly and efficiently within 48 hours. This is in contrast with banks where it usually takes a longer turnaround time and requires pledging collateral upon application. 

ABR: In your opinion, are credit bureaus and banks still effective for the retail consumer level, given the recent trends in employment and the shifts to e-commerce? In what way is the banking industry adapting to the new digital economic era? In what ways are they not? Does this present opportunities to fintech startups such as Validus? 

SJ: Banks will still continue to be relevant, and we see fintechs plugging the gap now, while the entire industry evolves to provide new, improved, and integrated solutions. At the moment, Validus has just received detailed guidelines from the Monetary Authority of Singapore, indicating that a digital bank license is appropriate for the company. 

The digital bank license is a natural step for Validus, having provided growth financing to Singapore SMEs for the last three years, in order to continue addressing the unmet needs of fast-growing SMEs and create a 360-degree solution for growth-oriented, homegrown enterprises. 

With a huge, unmet financing need for growing SMEs in Singapore, the digital bank will allow Validus to build an offering that combines the best of branch banking and online banking through better customer experience and superior digital service — be it for individuals or SMEs. 

Validus is always open to JV opportunities for the digital banking license. We are already in discussion with potential partners. It is a bit early to share our strategy for the early years of operations, as we consider the detailed guidelines from the MAS to crystallize Validus’ strategy. 


ABR: To what extent do you believe that opportunities for startups and fintech providers are found in the growing mismatch between traditional credit suppliers and lending consumers? Do you attribute this gap to the supply-side (i.e. large financial institutions and their cost structures or inability to accurately appraise the market) or to the demand-side (consumer profiles shifting out of the parameters sought by traditional finance, causing a decline in qualified prospects) or a combination of both? 

SJ: The underlying reasons for the gaps in SME financing lie in insufficient industry track records, management experience, and collateral. Increasingly, knowledge-driven businesses are light on fixed assets. Combine this with the conservative risk appetite of traditional lenders, and SMEs will not get full access to credit. 

I believe fintech providers have a big industry opportunity to fill, providing value that serves traditional credit supplier objectives and lenders’ expected returns. 


ABR: As Chief Data Officer, you must be highly aware of the increasing trend for the banking industry to capitalize on AI and Big Data Analysis in order to better identify and reach their target audiences. In what ways do you see the greatest benefits being derived from this, and where do the greatest opportunities exist for capturing this trend? 

SJ: In the early years of my career, I got to experience first-hand the inherent value that data analytics brings, enabling business decisions and driving change. Since then, I have pursued roles that are deeply rooted in analytics, which directly drive strategic business decision making, to tackle new challenges and pursue market opportunities. 

These are the benefits of capitalizing on AI and Big Data Analysis. At Validus, such innovations have driven better decision making across the credit lifecycle and obtained business insights that weren’t possible before. 

There are endless opportunities to build sophisticated knowledge, expand on machine learning and natural language processing, and improve product versions to better serve the unmet SME financing needs in the ASEAN region. 


ABR: How do you envision “creditworthiness” or an appraisal of a consumer profile in a fully advanced digital economy? 

SJ: In a fully advanced digital economy, the necessary information required to examine creditworthiness can be extracted from tech-enabled applications. These include unaudited financial statements, revenue projections, operating cash flow, and bank statements, just to name a few. 

It will also be executed in a transparent, yet secure, financial landscape. Countries will foster closer cooperation to better facilitate cross-border financial transactions, arising from increased overseas expansion and international presence. 

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