By crafting itself as the fintech startup for emerging economies, C88 is striving to break down financial inequality.
Building a credit score system and establishing peer-to-bank communication that accommodates the unbanked and a growing middle class would be a bold move for any Southeast Asian business, let alone a five-year-old startup. But C88’s leadership team was fully aware of these challenges, and their clear-minded approach recently carried them through a bountiful series C fundraising round and into a dominant position in their markets.
C88 currently operates platforms and marketplaces in two Southeast Asian countries— www.CekAja.com is the largest financial platform in Indonesia, and www.eCompareMo.com holds the same distinction in the Philippines. Each site provides innovative services for local users, including comparison shopping for insurance, loans and credit cards. For banks and lenders, C88’s platforms offer crucial customer data and credit scores for millions of consumers. This data allows institutions to price services at fair and competitive rates for low- and middle-income users, while simultaneously educating users—particularly the unbanked—on available services and providers.
Firmly Rooted Company Philosophy
C88’s approach to fintech stems back to its founders’ philosophy. For co-founder J.P. Ellis, that philosophy can be summed up succinctly: financial inequality exists due to a lack of trust and a scarcity of data. According to Ellis, lenders in Indonesia and the Philippines accept between 10% and 20% of formal credit applicants; in effect, financial institutions deem 80% to 90% of applicants to be “bad people” undeserving of various financial and insurance products.
“Clearly, that hypothesis must be untrue,” Ellis says. “So, rather than credit rejections occurring due to the ‘bad person’ problem, it is more due to a ‘blindness’ problem, which results in false negatives. This is created because traditionally there has been a paucity of data on populations.”
In Indonesia and the Philippines, smartphones have changed the game for data, incentivizing tech-wary individuals to access convenient digital services—and thereby share their personal information. C88 platforms have started to build on that trust. With more accurate information about their consumers, banks and lenders on the CekAja and eCompareMo platforms have become more understanding of individual situations and more willing to approve loans at affordable rates.
Selling The Vision To Investors
C88 has captured more than 50 million consumers across its platforms in just five years, and along the way, the company has become the leading financial marketplace in Indonesia and the Philippines.
However, an expanding user base and increasingly sophisticated goals challenged the founders in their latest fundraising appeal.
In their series C round, Ellis and the executive team set out to “dive even deeper” into the issue of financial inequality in emerging markets, exploring possible options for credit models and pre-approvals while building both informative data and consumer trust. These are noble goals, but by pursuing them, the company risked repelling investors with a challenging mission in a formalized sector that remains largely judgemental and analog.
“Generally, the expert community in finance—including the financial institutions like banks themselves—are very skeptical about the apocryphal ‘start-up with a credit score,’” Ellis explained.
“Of course, every start-up claims they have some algorithm or process that is proprietary, but the world of scoring and data models is fundamentally one of numbers, of Gini indices and the like. The reality is that quite few startups have this technology or sophistication. So, this was the challenge we were facing, and the C88 founder and executive team was unanimously in agreement that, all things being equal, we would prefer a strategic investor with this unique skill over a pure financial one.”
In these circumstances, Experian’s pivot toward Southeast Asia could not have occurred at a better time for C88. The team was thrilled at the opportunity to work with the world’s leader in credit information services, especially given Experian’s record in other emerging markets like India and Brazil. In the series C round, C88 established itself as a startup equipped and innovative enough to develop a credit score, and with Experian’s endorsement, the company distinguished itself from other fintech startups, Ellis concluded.
“The answers to those challenging questions became rather apparent, and suddenly it was axiomatic that we were very likely to be one of a very few companies with the capability to execute on this very challenging problem—the problem of financial inequity in our societies.”
C88 closed its oversubscribed round at the end of July with more than $28 million; Experian led the way, along with several other investors with experience in financial services, including responsAbility Investments from Switzerland, DEG from Germany, and InterVest from Korea. Later this year, C88 extended the round for an undisclosed investment from Korea Investment Partners.
The Secret To Success: A Clear Vision And A Path To Execution
In an October interview with DealStreetAsia, Ellis described how his company plans to use its new funds: by deepening in its existing markets of Indonesia and the Philippines, and launching a new financial marketplace in Thailand in the next six months. Thailand presents an opportunity for C88 to serve a more advanced market, and the scope and range of the financial tools the company can offer customers is still in development.
After establishing C88’s expertise in the series C round, Ellis feels optimistic about the company’s chances in a future financing rounds. The company has a very clear direction, a firm roadmap to execute its goals, and the team is “maniacally focused” on fulfilling its promises. Ellis attributes the startup’s unprecedented success to its company culture, one that values ever-deeper understanding of the issues facing the firm.
“It is critical to understand and deeply comprehend the true nature of the challenges a company is facing,” Ellis explained. “In our case, we were soberly aware that prior to the round, our challenges could not be solved by capital alone. Therefore, a partner like Experian and Experian Ventures made absolute sense. And that understanding permeated in the market and led to the round’s oversubscription. So clear-mindedness is key.”
Quotes in this article have been edited for clarity.