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Startups

Credit app Kredivo bags one of Southeast Asia's top fundings

Indonesia-focused startup will use part of $90m to expand into Philippines

FinAccel started operations in 2016, and aims to serve the "underbanked" in Indonesia through its digital credit service Kredivo. (Photo courtesy of FinAccel)

JAKARTA -- The fintech startup that operates the digital credit card service Kredivo in Indonesia has secured $90 million in new capital, in one of the largest fundraising rounds in Southeast Asia this year.

The size of the investment is an indication of how competitive the virtual credit card market has become in Indonesia, a nation where financial technology has the potential to reach millions of people outside the traditional banking system.

Singapore-based FinAccel's series C funding round was led by the Mirae Asset-Naver Asia Growth Fund -- a $1 billion joint fund by South Korean financial group Mirae Asset and internet company Naver -- and venture capital firm Square Peg Capital.

Akshay Garg, CEO of FinAccel, said that the round was "way oversubscribed" despite investor wariness toward startups after the WeWork fiasco.

"Any business which is venture backed basically means initially it is a loss-making business that should at some point in time be profitable, and we are well on our way on that journey," he said.

"We are doing better than planned, and are well on our way to actually building a solidly profitable business within the next couple of years."

The $90 million funding is one of the largest known funding in Southeast Asia excluding fundraising by unicorns -- startups valued at more than $1 billion -- according to data from Singapore-based venture capital Cento Ventures.

FinAccel says it settles tens of millions of dollars of transactions per month for the biggest e-commerce players. (Photo courtesy of FinAccel)

It follows a $300 million investment in Vietnamese payment service operator VNLIFE by the SoftBank Vision Fund and Singaporean state investor GIC, as well as a $100 million investment in the Vietnamese e-logistics service provider Scommerce by Singapore's Temasek Holdings.

Tuesday's announcement comes days after FinAccel secured a credit line of 1 trillion rupiah ($71 million) from Bank Permata, a private Indonesian lender.

FinAccel started operations in 2016 and aims to serve the "underbanked" in Indonesia through Kredivo. The service is mostly used for e-commerce purchases. The company says it settles tens of millions of dollars of transactions per month for the biggest e-commerce players.

Using proprietary technology to assess a user's creditworthiness, Kredivo says it has achieved a nonperforming loan ratio of 3 to 3.5%, a low level comparable to that of commercial banks

"We exist simply because in a country like Indonesia, there is a massive credit gap," Garg said. "You are talking about one of the most underpenetrated countries in the world when it comes to retail credit."

"What we really focus on is the mass affluent middle class, urban working professionals, office workers who are not getting credit from the banks," he added. "Our internal survey shows 60% of our customers have accessing credit from a financial institution for the first time."

Digital credit card services are fast-becoming a next battleground for Indonesia's tech startups. Sequoia Capital-backed Akulaku, which raised $70 million in Series C funding last year, is Kredivo's direct competitor and is reportedly in talks to raise another $100 million.

Meanwhile Go-Pay and Ovo, two leading contenders in Indonesia's digital payments sector, launched their credit services earlier this year. Traveloka, Indonesia's answer to Expedia, offers a similar service on its platform.

FinAccel said that capital raised from its latest fundraising will be partially used to expand to overseas markets.

"We just acquired a lending license in the Philippines,," Gard said. "We are going to be launching in the Philippines in the first half next year. Beyond that we are evaluating couple more markets."

The CEO said that an initial public offering is "not a given," but he added that "it is something that we will look at over the course of next year."

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