HF Whizz and the end game of financial apps


#1

Virtually all local banks have some form of online banking or an accompanying banking app. Admittedly, it is a niche that is yet to make sense for most locals, esp the older generation who love to check their monies at the banking hall.
House Finance launched theirs yesterday but it is more of a utility tool than a banking app, but what can we say? It does not do anything different from what we have come to expect of such a tool, which is to say it has a wallet, an option for paying bills and fintech’s wet dream - loans.
I wrote the specifics of the app here http://www.techweez.com/2018/07/24/hfc-mobile-app-launch/
I’m not sure what if any of you have tested the app: I did after attending the event just for curiosity reasons. It is well designed and the visuals are admirable from the aesthetics perspective.
The only thing I did was request for a loan. It asks for the normals: ID, you line of work bla bla bla alongside its analytics tools that goes through your messages and any other data that lenders deem worthy to curate eligibility. However, I have not defaulted any loans (save for HELB but I swear I will pay them - they just need to be patient with me), which is why I was surprised when they denied me those bill-paying nuggets. See the attached emails for what the app required of me for eligibility.
Anyway, my question is what is the end game with financial apps? Every Tom, Daniel and Harry is making one, and loans are strategically put there to tempt you.
As we go through this, I need someone to clarify about debt buying. I have heard that these e-lenders sell the loans you have defaulted to debt-collecting companies. They pester you with phone calls and SMS until you pay up, together with the fines. The fines are what the companies take, while the principal amount is remitted to the lender.
So, we ask, what is the end game with these apps?


#2

Generally speaking getting credit in Kenya is an expensive affair.

Regarding these apps, a banker friend advised me that the only sure way to raise your limit is to borrow and pay regularly. Absurd because it’s not that hard to hit Mpesa’s daily limits and still get denied credit.


#3

Don’t remove your SIM card, this app will hold you hostage.


#4

Financial apps are a near guaranteed way to make money, once you get the starting capital sorted out. Pool some money - $1-$2 Mil to get operations started, build an app, then go on an aggressive marketing campaign to acquire users

The first 10,000 borrowers who qualify could be given interest free loans for up to KES 1,000 so you’ve spent $100,000 in user acquisition. The who qualify is a clincher as 100K people could sign up for loans at various amounts but only 10K qualify for the interest free offer - the usual pre-qualifiers of location & location history, device type, MPESA history, phone number prefix etc are used to determine this.

Get a substantial user base - 100K members (1M is you’re really aggressive). 100K people borrowing minimum of 1,000 a month & paying back 10% interest = KES 10M in revenue guaranteed. Now it’s time to categorize these users extensively with a recommended 70% accuracy ratio - For some platforms it’s as high as 95% accuracy but let’s stick with 70%.

Once you figure out the borrowing habits, approach retailers with your data and negotiate reduced rates for your members/app users. An example would be Safcon’s alleged partnership with Roto tanks to give their sacco members items at reduced rates. This generates value for users but value isn’t the only reason lending companies do this - it’s not even the first one.

Example:

A loan app with 1M users has 200K members who borrow money for home development. A roto water tank that costs 50,000 for example, will be sold to app users at 45K but the app business really buys it for 40K. If 1% of the 200K buy the tanks, they save 5K from their loan amount and the app makes 5K from each of them for 10M in essentially what is FREE MONEY.

To ensure the user pays the 5K to the loan company, there is an estore on the app where users opt to buy discounted items. The money is sent straight to the retailer (after deductions) and the user gets the item shipped to them. Build up your store, get more vendors to discount items, rinse and repeat this with 1M users, 1% of whom are buying items at KES 45K or more and you have the loan company making KES 50M a month of free money in ideal conditions.

Possible additional expenses to this business feature would be building the store. in-app advertising costs and a team of 2-3 people to run it. Even if it costs you 1M a month but is generating 5M, with a potential for 50M, it’s def worth the investment.

Isn’t Jumia in rumored negotiations with one f the loan apps to offer such a feature?

This is their preferred method of qualifying you for a loan. If you want a loan for 100K, Ask someone to lend you 40K, then shuffle it through your account for 30 days, withdrawing and depositing various amounts via mobile money or sending to other users who send it back to you in random amounts. 30 days later, you’ll get an approval for a 120-150K loan, and it will have cost you 2-10K in transactional costs, a small investment given the returns.

UPDATE

Here is a screenshot of one app, Aspira, that does something similar to what’s been described above


#5

These apps are the Shylocks of the contemporary world. I would never advise anyone to borrow more than 5k from them. The only time I borrowed money from these apps was in 2016 on Tala (twice, I was broke AF nikimalizia campus :joy: but I repaid).

I would advise guys to build their credit worthiness kwa banks. The rates are still at 14% and you have better terms as opposed to borrowing petty cash and get harassed while repaying. Otherwise, hustle for petty cash and fill up your Mpesas for a rainy day. ama namna gani? :grin: