Mr. Matt Flannery is the co-founder and Chief Executive Officer of Branch International, one of the fastest growing digital financial platforms in the country. Recently the firm celebrated its one year of operations in Nigeria where Flannery spoke at length on their success story within the period. ANTHONY AWUNOR was there. Excepts:
Micro lending only started picking up in Nigeria. What inspired the initial focus on micro lending?
The market in Nigeria and the needs of customers here has created the perfect conditions for our product. We have disrupted the financial services space by replacing physical branches and traditional underwriting processes with a proprietary machine learning algorithm to make lending decisions. This means we can offer more people a better way to access capital and credit.
As we have mentioned, we have seen great growth in Nigeria since our launch — we have given more than one million loans and disbursed more than N4 billion. We think this is because of two reasons. The first is market factors. Nigeria has seen accelerating smartphone adoption; a high appetite for world-class financial services; and an acceptance and propensity to use mobile financial technologies.
In total, the African market has seen accelerating rates of smartphone adoption in recent years. In fact, GSM Association Intelligence recently predicted that there will be more than 400 million new smartphone connections in Sub-Saharan Africa by 2020, bringing the mobile install base to more than half a billion users. We believe that Nigeria will be on the forefront of that growth and are very excited to be working here.
At the same time, the high cost of credit and the risk-averse nature of the traditional lending providers, has locked out many Nigerians from access to basic financing. This presents Branch with a unique opportunity to build world-class products that solve this need. So market factors are definitely one reason we think we decided to launch in Nigeria.
But the bigger reason that we think customers have come to love Branch is really because of the product and the experience we’re building. The company’s growth has been spurred by its unique policy of offering lower interest rates and longer repayment terms to customers who have reached higher credit limits, thereby encouraging repeat uptake.
Confidence in cybersecurity has been low. How does you plan on combating possible cyber security risks within the platform?
At Branch, we use world-class data security and encryption techniques to protect our customer’s data. As I mentioned, we use smartphone to determine loan options. That data is then encrypted and protected. We don’t share customers’ data or information with third parties unless it is for dedicated business purposes, such as reporting defaulted loans to authorized credit bureaus.
The lending process can be risky on both ends (lender and borrower). What is your company’s plan in regards to tackling these risks?
Well, of course, as we have mentioned, we think the key here is to ensure we are able to offer the right personalized loan to each customer. We want to ensure they are getting the amount they want with terms that make sense. That’s dependent on our machine learning and data science algorithms and dependent on our technology being top notch.
From a consumer side of things, we believe in personal responsibility and education. We make our terms and rates as clear as we can. We are explicit about what data we use, so our users can be informed on that front. And we are very informative with reminders and support for repayment.
Beyond that, we also believe in adhering to the strictest of lending best practices. In fact, we are self-regulating and adhere to the strictest standards of micro finance lending. This is both because we lend out of our capital and because of the influence of some of our shareholders, such as the International Finance Corporation.
What is unique about the platform’s algorithm?
Our machine learning algorithms process thousands of data points to create personalised loan options in a matter of seconds. These data points include things like GPS data, call logs, contact lists, handset details, SMS logs, and social network data.
We use cutting edge machine learning methods to build models that predict creditworthiness, prevent fraud; enable us to deliver high-quality customer service and many more applications. We’re building a system that improves over time allowing us to offer the most competitive loan terms.
Machine learning is not a new field and best practices are well established but there is a constant evolution the algorithms that extract information. By staying on top of these developments and building on a system that utilizes these best practices we can offer our customers the best possible service.
How do you ensure data security? Again what happens to customers’ information when they opt out?
We use world class data security and encryption techniques to protect the data you share. With this data, we create a seamless experience that provides transparent financial services to our customers. Branch never shares your information with third parties unless it is for dedicated business purposes, such as reporting defaulters to authorized credit reference bureaus. We do not sell your data or credit profile.
At Branch, we think data protection and privacy is paramount for our business and something we care deeply about. We also explicitly tell our customers what data we are looking at and how we use it. If a customer decides to ever leave Branch, they can request that their data be deleted.
What are the requirements for loans?
Requirements are simple: all you need to apply is a phone number or Facebook account, an ID number, and a mobile money or bank account. We will also request access to the data on your phone in order to build your credit score. We use data from your phone, including your handset details and financial transaction messages to make lending decisions.
We combine this with your Branch repayment history to build an individualised credit score, which determines the loan offers you receive. We aim to process all loans within 24 hours. On average we process loans in less than 3 hours and hope to reduce that to a few minutes. Branch uses data from your phone, including your handset details and financial transaction messages to make lending decisions.
These data are a crucial part of our decision making process, and allow us to provide seamless and efficient financial services. The more you use branch, the better it gets. As you build your credit history with Branch, our fees dramatically decrease and you unlock larger loans and more flexible terms. We designed our loan product to fit your needs. We do not require savings to become a customer. Our loans do not have late penalties or rollover fees.
Please tell us about the Branch Concept
Branch is a for-profit socially conscious company based in San Francisco, Nairobi, Lagos and Mumbai. We use technology to dramatically reduce the cost of delivering financial services in emerging markets. Our first product is credit. Branch is like a bank in your pocket, there for you at all times.
Our fees are clear and easy to understand. Our terms allow for easy repayment. We do not charge late fees or rollover fees. The more you use Branch, the better it gets. As you pay back on time, our fees decrease, and you unlock larger loans with more flexible terms.
The process of our transactions are very simple. First you complete our application in minutes. Receive your loan instantly. We provide world-class support, 24 hours a day. Ask a question in the app and receive a response in minutes. We are motivated by seeing you succeed, and we will never stop improving to better serve you.
How did it all start?
We started in Kenya about four years ago. Branch has offices in Nairobi, Kenya; Lagos, Nigeria; and San Francisco, United States. At the moment, Branch operates in Kenya, Tanzania and Nigeria. Kenyan market has just picked up because they now have a good mobile money system which is helping the people.
We are celebrating our one year in Nigeria and the experiences are phenomenal. A lot of people question the decision and they said Nigerians are already in scenario with mobile money; so why are you going there?. But we can see that Nigeria is better than any other market as we reach our first year. In terms of mobile penetration, I do believe that about 80 per cent of Nigerians have mobile phones; I think about 20 per cent has smart phones. So if we are speaking about 100 million people that is already a big market and that is increasing
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