Tonik has an installment product - just don’t call it BNPL

In The Top Up, we detail Tonik CEO Greg Krasnov’s thoughts on the fintech industry and dive into a new development in Indonesia’s insurtech space. [Read from your browser]( The Top Up 💵 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 you’re not a subscriber, get access by [registering here](. Written by Putra Muskita Journalist Hello {NAME} Is having a credit card good or bad? Well, it depends. If you’re using it to purchase things you don’t need and can’t afford, then it’s probably not beneficial. But if you can pay the balance each month and you’re milking your card for points and other rewards, then it's probably useful. But to someone like my grandmother, who has seen friends her age slip into debt by swiping plastic, the mere mention of “credit card” gives her the heebie-jeebies. Is the term “buy now, pay later” starting to go into that direction? Perhaps, but we’re still in BNPL’s early days. BNPL firms - and many of its millennial and Gen Z users - would argue that the service lets people manage their money better, has more transparent fees than credit cards, and even enables some to enter the financial system for the first time. But there’s at least one person who openly dislikes that term: Greg Krasnov, founder and CEO of Philippine digital bank Tonik. In this week’s Big Story, my colleague Melissa Goh expounds on her conversation with Krasnov on a wide range of topics, such as his gripes with BNPL despite offering a similar “sales finance” product, as well as crypto and the digibank scene in the Philippines. Meanwhile, in this week’s Hot Take, I examine Indonesia’s maturing insurtech space as it welcomes its first full-stack startup. -- Putra  --------------------------------------------------------------- THE BIG STORY  [Tonik CEO on BNPL: 'I prefer to call it sales finance']( Tonik Digital Bank may offer installment shopping loans too, but it’s doing it the good ol’ “bank way.”  --------------------------------------------------------------- THE HOT TAKE Crunch time for Indonesia’s insurtech startups? Here’s what happened: - Insurtech startup PasarPolis has [announced]( a strategic partnership that makes it Indonesia’s first “full-stack insurtech ecosystem.” - Its partner, local firm Tap Insurance, recently won a license from Indonesia’s Financial Services Authority to offer underwriting services. - PasarPolis said it has issued 1 billion policies between 2019 to 2021, serving about 80 million customers. Here’s our take: It’s no secret just how attractive the insurtech space is in Indonesia and other countries in Southeast Asia, considering the [low insurance penetration and sizable populations]( in these developing markets. In fact, there was a point last year when insurtech funding rounds were announced [within days]( of each other. But in a sign of just how nascent the space is, PasarPolis only became a full-stack insurtech (and Indonesia’s first, to boot) now - eight years after its founding. The company had been known for its customizable microinsurance products, distributed through platforms like Tokopedia and Traveloka but created in partnership with traditional insurers. Full-stack insurtech firms [do it all]( - from developing products to underwriting and distribution - including assuming the risk of insuring customers. In contrast, most insurtech startups in Southeast Asia outsource that risk to traditional insurers, focusing instead on co-creating products or distributing them through digital channels. Of course, going full-stack is easier said than done. In order to do so, a firm needs the expertise for underwriting (assessing the risk of insuring a customer), not to mention the cash to fulfill claims and obtain the requisite licenses from local regulators. But as David Yin of GSR Ventures [previously]( pointed out, companies that don’t do so can’t capture the value from underwriting and risk management, and they will find it difficult to justify their customer acquisition costs. Without licenses of their own, insurtech firms also have to rely on incumbent firms to co-develop products and don’t get enough say in their pricing. Some argue that as a result of this limitation, true innovation and disruption has eluded the sector so far, with many firms mainly focusing on digitalizing sales channels. Just days before PasarPolis’ announcement, Indonesian B2B insurtech startup Aigis - which raised a [US$1 million seed round]( in May 2022 from Y Combinator and other investors - [pivoted]( to become a fintech and project management platform called Finnix. Its CEO cited unsatisfactory growth in the insurtech space as a reason for the shift. It goes without saying, though, that PasarPolis is a different animal compared to Aigis. Investors like the International Financial Corporation, [Gojek, and Tokopedia]( have injected [almost US$60 million]( into PasarPolis. The company also operates outside Indonesia, specifically in Thailand and Vietnam. Not all firms are going in this direction, though. Qoala, a Sequoia Capital-backed firm that focuses on online and offline distribution through agents, has no plans to go full-stack. In its current model, the company still has “plenty of room” to introduce and grow new products, Qoala founder and CEO Harshet Lunani said previously. To be sure, insurtech firms face a host of challenges in disrupting the status quo. In a developed market like Singapore, for instance, insurtech startups [have struggled]( to innovate in a capital-intensive, highly competitive, and strictly governed environment. Add that to the current global macroeconomic situation, which is gloomy enough that it could affect the valuations of companies seeking to raise funds. But as GSR Ventures’ Yin [noted]( before, “the best startups will still get funded, and they will emerge as winners from this.” – Putra --------------------------------------------------------------- NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [Fintech unicorn Xendit enters Malaysia, invests in local player Payex]( With the expansion, Xendit is now present in three markets including Indonesia and the Philippines. 2️⃣ [YC-backed Cashfree Payments sheds up to 80 employees]( A source estimates that Cashfree Payments, which has raised US$40 million to date, had a headcount of nearly 1,000 prior to the “organizational restructuring.” 3️⃣ [East Ventures leads $8.5m funding round of P2P lending firm]( Founded in 2018, Indonesia-based Komunal connects rural banks with investors across Indonesia through its pioneering “neo-rural bank” concept. 4️⃣ [Singapore fintech firm secures initial license for Pakistani digibank]( HugoBank is a consortium comprising The Getz Group, Muller & Phipps Pakistan, and Atlas Consolidated. 5️⃣ [Malaysia’s GHL extends Grab’s PayLater to offline merchants]( Consumers can now delay paying the full amount of their in-store purchases while still earning GrabRewards.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preferences center. In the meantime, if you have any feedback or ideas, feel free to get in touch with Terence, our editor-in-chief, at terence@techinasia.com. See you next week! P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. You can also break our hearts and remove yourself from all Tech in Asia emails over [here](  Copyright © 2023 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894