In The Top Up this week, we dive into Tokoscore, Tokopediaâs internal credit scoring arm, and Singaporeâs recently launched BNPL code of conduct. [Read from your browser]( The Top Up ðµ Welcome to The Top Up! Delivered every Wednesday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in fintech. If youâre not a subscriber, get access by [registering here](. Written by Melissa Goh
Fintech Journalist Hello {NAME} This weekâs featured story is about the unsung heroes behind every fintech lender. As more firms - including ecommerce companies, super apps, and even mortgage platforms - venture into lending, demand for reliable and robust credit-scoring tech has gone up. These lending enablers are rarely talked about, but hereâs what you need to know: According to an industry source, the quality of most credit scorecards on the market are mediocre at best. "Alternative data" can also sometimes be irrelevant to the companies or products they're being applied to - or require a lot of work to treat and qualify. This not only has repercussions for the segment of individuals and businesses currently overlooked by formal financial institutions but also for the firms extending loans to them. My colleague Budiâs Big Story this week deep dives into Semangat Digital Bangsa or Tokoscore, the credit-scoring business of Indonesian ecommerce platform Tokopedia, and considers how it might fit into the GoTo ecosystem. Tokoscore analyzes the behavior, activity, and transaction history of users on the Tokopedia platform to assess their creditworthiness. It can also extrapolate that data to predict income levels and even identify fraud. The service is currently used by Dhanapala - Tokopediaâs peer-to-peer lending platform - as well as third-party financial institutions like buy now, pay later firm Kredivo. Speaking of BNPL, Singapore unveiled an industry code for the sector last week. While the implementation of the code is undoubtedly progress for the sector as a whole, there are caveats - as I outline in this weekâs Hot Take. â Melissa
 --------------------------------------------------------------- THE BIG STORY [How credit analysis can help Tokopedia score against ecommerce rivals](
Tokoscore has the potential to increase the loan books and reduce non-repayments for not just its parent firm GoTo but also for third parties.
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--------------------------------------------------------------- THE HOT TAKE Singaporeâs new BNPL code of conduct Hereâs what happened: - A working group made up of the Singapore Fintech Association and eight buy now, pay later players in the country have launched the [BNPL code of conduct]( under the guidance of the Monetary Authority of Singapore.
- It limits the amount of outstanding payments that an individual can accumulate - in the absence of credit checks - with a provider to S$2,000 (US$1,043) at any time, among other safeguards.
- The code will be rolled out in phases, including the setting up of a credit information sharing bureau, completing the accreditation process, and awarding the trustmark to accredited BNPL providers. Hereâs our take: All good things must come to an end. For BNPL operators in Singapore, the days of laissez-faire are over. Well, not entirely. We first discussed the [dark side of BNPL]( early last year, as it was [gaining traction]( in the city-state. While itâs common in the industry for players to charge a flat repayment fee that doesnât compound over time (unlike credit cards), we found that the presence of such fees - as well as how theyâre calculated - were often either listed in fine print or deeply buried under pages of FAQs or a terms of service. Now, nearly two years since BNPL became popular in the city-state, regulation has come - or at least something that approximates regulation - in this previously uncontrolled sector. The code aims to address the problem of over-indebtedness as well as put in place industry best practices. These include: - A S$2,000 limit that consumers can rack up at any one provider, preventing an already vulnerable person from incurring further debt.
- A credit information sharing bureau - separate from the national credit bureau - to encourage the sharing of customer information and credit behavior among BNPL providers.
- Committing to not initiate bankruptcy proceedings against borrowers in the event of non- or late repayment, and considering providing financial assistance where necessary.
- A trustmark, to be placed at the point of sale, that will distinguish between compliant and non-compliant players. (The above is not exhaustive.) At a glance, the code looks similar to the one laid out in Australia since March 2021. Like Down Under, the code is self-imposed, stresses clear and transparent communication around fees and marketing, has dispute resolution processes in place, and has additional checks for transactions beyond a certain limit (Australiaâs is A$2,000 or US$1,265), among others. But there are caveats. For one, the sector still isnât officially regulated the way traditional credit or lending firms are. For instance, BNPL operators do not have to trigger official credit checks with the Credit Bureau of Singapore. Information collected in the private credit bureau, which will be built by Experian, will remain separate from the official credit bureau. In Australia, this has already proved to be limiting. BNPL firms have not been required to report information, including a customerâs repayment behavior, to official credit bureaus - which many lenders access when reviewing loan applicants - even though missed payments could be a sign of deeper financial issues. As with many other codes, this one is set out and agreed to by the players, with terms that arenât strictly enforceable. In the event of non-compliance or violations of the trustmark, the Singapore Fintech Association will raise the matter to the oversight committee - which is made up of members who have been voted in by the BNPL working group. Another caveat is that the S$2,000 limit (not including the first installment payment) is applied to each provider and not across the various BNPL operators in the country. In theory, this means that an individual could incur outstanding payments that are higher than the proposed S$2,000 ceiling, across multiple BNPL providers, without triggering any additional credit checks. Not a problem if the person can afford it, of course, or if itâs picked up by BNPL operators conscientiously checking against other BNPL activity in the credit sharing database. To give BNPL providers the benefit of the doubt, thereâs a high chance that theyâll do so given that itâs hardly in their interest to overextend installment payments to any one person. Providers could also, in theory, set a limit that's lower than S$2,000, depending on what it considers to be reasonable. Finally, the code doesnât distinguish between segments of customers, so long as they are above 18 years of age. As a result, the most vulnerable segments of Gen Z - arguably the students who still donât earn their own income - remain at risk of incurring more debt than they can take on. On the whole, though, Iâd say the new code is still a win for consumers. Better transparency and ethics must surely count as progress, though how robust and effective the code will be in terms of enforceability - self or external - remains a question mark. With countries like Malaysia also exploring the feasibility of launching similar rules for BNPL firms, codes in Singapore and Australia will also go a long way in creating industry best practices, especially as BNPL becomes more ubiquitous across the region. â Melissa Currency converted from Singapore dollar and Australian dollar to US dollar: US$1=S$1.43; US$1=A$1.58.
 --------------------------------------------------------------- NEWS YOU SHOULD KNOW Check out Tech in Asiaâs coverage of the fintech scene [here](. 1ï¸â£Â [Gojek-backed Bank Jago doubles revenue to $24m for Q3]( The digibank recorded US$750,000 in net profit for the quarter, driven by a network of partnerships with 38 companies and financial firms to disburse loans. 2ï¸â£Â [Indonesiaâs BTPN Syariah sees 21% revenue growth in Q3 2022]( The Shariah-compliant bank, which focuses on women entrepreneurs, saw loan disbursements increase 11% for the quarter compared to the same period a year ago. 3ï¸â£Â [Warburg Pincus to pour $350m in insurtech platform Oona]( The investment in Oona Insurance, which was formed in partnership with former FWD Group CEO Abhishek Bhatia, is the US private equity firmâs largest in Southeast Asia. 4ï¸â£Â [MoneySmart launches own insurance brand, Bubblegum]( The insurance firm, which offers car and travel coverage, will build upon data on consumers that the personal finance marketplace has amassed over the past decade.
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