‘Save now, buy later’ struggles to find product-market fit

In The Top Up this week, we look at the challenges faced by “save now, buy later” apps and dive into Investree’s continued troubles in Indonesia. [Read from your browser]( The Top Up 💵 Welcome to The Top Up! Delivered every fortnight 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]( IN FOCUS In today's newsletter, we look at: - A new crop of startups encouraging consumers to [save up for future purchases]( - A written warning served to lending platform Investree by Indonesia’s Financial Services Authority - The Vietnamese company taking advantage of [a growing digital gifting market]( --------------------------------------------------------------- Hello {NAME} In the face of adversity, creativity is the ultimate weapon. This was an invaluable piece of advice I received from a favorite middle school teacher that I’ll always carry with me. The past year or so proved challenging for many tech players, including buy now, pay later (BNPL) startups. In the face of this, one firm demonstrated creativity by pivoting to a new model termed “save now, buy later” (SNBL) in 2022, though the company ultimately ceased operations a year later. SNBL firms like Split in Malaysia and Multipl in India encourage customers to set savings goals and purchase only when they have saved enough. This addresses some of the concerns associated with BNPL practices, which can lead to debt if not managed well, or encourage impulsive spending. However, getting people to save and merchants to come on board turns out to be more challenging than one thinks, as my colleague Melissa highlights in this week’s Big Story. Meanwhile, for this week’s Hot Take, I delve into the recent challenges faced by Indonesian peer-to-peer lender Investree and explore its wider implications for the lending industry in the country. -- Budi  --------------------------------------------------------------- THE BIG STORY [Why ‘save now, buy later’ apps need to look beyond just savings to survive]( While saving up to purchase an item is the responsible thing to do, nothing beats the rush of some good ol’ instant gratification.  --------------------------------------------------------------- THE HOT TAKE Are recent woes at Investree a yelling timber for the lending industry? Here’s what happened: - Indonesia’s Financial Services Authority (OJK) has issued [a written warning]( to online lender Investree due to the rising rate of bad credit on the platform. - OJK said it will impose “administrative sanctions” against Investree in accordance with regulations if the issue persists. - Further violations could result in fines, restriction on business activity, and potentially a revocation of Investree’s business permit. Here’s our take: Late repayments on loans are alarming lenders on Investree. Last November, internet personality Andy Senjaya, a lender on the platform, publicly [expressed concerns]( of potential losses amounting to hundreds of millions of rupiah (thousands of US dollars) after one and a half years of not receiving repayments on his loans. [A five-day system disruption]( around the New Year’s weekend also sparked rumors of a shutdown, though the company then said it was due to system maintenance. As of January 11, 2024, Investree reported a TWP90 of 12.58%, double OJK’s mandated limit of 5%, which prompted the formal warning. TWP90 is a measure of default levels on loans within 90 days after their due dates. Before the warning, OJK had [urged Investree]( to formulate an action plan for enhanced collection efforts on overdue portfolios. See also: [Indonesia’s OJK launches more stringent regulations for online lenders]( Investree, which only lends to SMEs, acknowledged the recent surge in TWP90 on its platform in an interview with *Tech in Asia* earlier this month, attributing it to long-term borrowers adversely affected by the Covid-19 pandemic. “The pandemic has negatively impacted the global supply chain, affecting the ability of SMEs to meet consumer demand, leading to a decline in SME income and subsequently affecting their ability to repay loans on time,” an Investree spokesperson added. The firm also explained that the TWP90 figure might appear higher when monitoring is done in the first two weeks of the month because borrowers tend to repay loans toward the end of the month. Nevertheless, this whole situation has allegedly affected individual lenders, with numerous complaints of failed repayments. Investree is not the only lending company grappling with challenges. Recently, OJK imposed [a deadline]( for Akulaku to rectify issues in its BNPL scheme, following alleged violations of supervisory obligations. Without specifying details, OJK said the company had [violated restrictions]( on financing distribution and that it needed to improve its underwriting process and risk management aspects. The BNPL firm has until June this year to implement corrective action. Nevertheless, Investree’s climbing default rates are raising concerns about the sustainability of Indonesia’s lending industry. Local financial experts have emphasized the necessity for improved [fraud detection management]( and alternative credit scoring systems to address this issue. Data per June 2023 from OJK [showed]( that the country's online lenders collectively accumulated US$112.7 million in non-performing loans overdue by more than 90 days. The figure marked a 54.9% increase from the previous year. Furthermore, as of November 2023, OJK noted that there were 19 fintech lending startups that had bad credit above the 5% threshold. On its part, Investree has said it is reducing non-performing loans and improving asset quality by directing financing to productive sectors such as healthcare equipment, computer services, and creative production houses. But it may be months before the changes bear fruit.  --------------------------------------------------------------- NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [Grab injects additional $109m into subsidiary GXS Bank]( This adds to the super app’s previous capital injection of US$101 million into the bank in July 2023. 2️⃣ [Salarium halts operations amid salary disbursement trouble]( The Philippines-based payroll automation startup, which has suspended its operations indefinitely as of December 31, 2023, has laid off nearly 20 staff members. 3️⃣ [Atome raises $31m from parent firm Advance Intelligence Group]( Despite Atome’s recent job cuts in Indonesia and exit from Vietnam, the Singapore-based BNPL firm is looking to fill 70 key roles across Southeast Asia. 4️⃣ [Ritesh Pai named CEO of international payments at PhonePe]( Pai last served as the president of products and solutions at UK-based TerraPay. 5️⃣ [OJK lowers interest rate ceiling for Indonesia’s online lenders]( Under the revised rules, lending platforms can only charge a maximum interest of 0.1% and 0.3% per day for productive and consumptive loans, respectively.  --------------------------------------------------------------- FYI  [Vietnam’s Got It eyes peer-to-peer gifting as it boosts profits]( The VNG-backed rewards platform, which improved its net profit by 278% year on year in 2023, will be launching a mini-app on Zalo.  --------------------------------------------------------------- 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 in a fortnight! 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 © 2024 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894