Op-ed: Who’s Afraid of Peer-to-Peer Lending?

Author: Sutapa Amornvivat, Ph.D.
Published in Bangkok Post newspaper/ In Ponderland column 29 November 2018

The recent announcement by the Bank of Thailand on peer-to-peer (P2P) lending rules represents a significant paradigm shift. If all goes to plan, by early next year Thailand will be among the few Asian countries, most notably China and Indonesia, to legalise this match-making platform between lenders and borrowers.

While this move speaks volumes about the progressive policy environment for Thai fintechs, the risk manager in me says that we should carefully weigh the pros and cons before jumping in.

The concept of P2P lending is a platform as a matchmaker role between investors — retail or institutional — with available funds, and borrowers who need the funds. In theory, such a platform can greatly enhance market efficiency and better allocate funds between people, overriding cumbersome intermediaries such as banks. It would be a win-win situation for both sides — investors get better returns; while borrowers get better interest rates and access.

Yet, this year, we have all heard of a series of bad press in China about hundreds of P2P lending platforms having gone bust. Its repercussion of eroding trust in this industry has become the key debate in the global fintech space.

On the other hand, success stories rarely make the news. There are P2P lenders in the US and the UK that have performed well for over a decade. Even in China, some have emerged as victors despite the growing mistrust. Thailand is blessed with the opportunity to learn from these experiences to ensure we start off on the right footing.

There are key lessons to learn from the crisis in China for all parties — those thinking of starting up a new P2P platform, potential investors, consumer protection groups, as well as regulators.

First and foremost is how to mitigate fraud and security risks.

In China, before the recent crackdown, there were several cases of outright fraud by platform operators. Ezubao, one of the largest players, ran a Ponzi scheme that made off with 100 billion yuan (nearly half a trillion baht) from investors. Many others were caught in a similar fashion. Regulators should have a stringent monitoring system to prevent such scams. Investors, too, should be wary of the trustworthiness of P2P platforms.

In terms of security, given the popularity of the P2P lending market in recent years, this industry will surely continue to be a top target for cybercriminals using stolen identities to create loan applications with synthetic credentials. Platforms that place an emphasis on cybersecurity and airtight KYC technology will thrive without risking fraud losses or exposing investors’ and borrowers’ sensitive information. Protecting the platform against fraudulent activities, of course, is not cheap. Therefore, finding the right trade-off between platform fees and fraud risks will be crucial to borrowers and investors alike.

Another key lesson is how well P2P platforms manage liquidity risk. Most of the recently collapsed platforms in China like PPMiao (which prompted a major protest in Beijing) experienced a run, similar to a bank run, where investors withdrew money at the same time, leading to a liquidity shock. This can be mitigated by having a separate fund to buffer such a risk or a fund portfolio mix of some larger investors similar to platforms in the US and UK.

Last but not least, we must educate the public. Borrowing money from friends and family is a simple concept, but with a digital platform and internet connection, P2P lending broadens the reach for borrowers to access capital from someone else.

At the same time, investors have options to seek higher returns than bank deposits. In this process, the platform has a role to play as a matching mechanism. It should possess a robust and time-tested credit scoring model allowing investors to understand the risk and make better informed decisions.

Underwriting a loan, especially one without collateral, is not easy and requires deep consumer credit knowledge. Positive investor returns are never guaranteed. Investors in P2P platforms must understand the risks of this new kind of investment. A misconception exists that P2P investment is very low risk. This has led investors to discount the importance of diversification. As seen in China, retail investors lost their life savings by mistaking P2P investments as safe deposits with promised returns; altogether too good to be true.

P2P lending has the potential to address the loan shark problem in Thailand and improve financial inclusiveness. It could also raise awareness of the Thai public about financial investment to think about returns on their financial assets beyond bank deposits, preparing us to enter an ageing society.

No one should be afraid of P2P lending. If done right, the introduction of P2P will no doubt present many opportunities for Thailand. However, we should tread carefully. It is vital we learn from the past lessons — both the successes and failures of other P2P platforms to ensure their best practices are emulated and their mistakes are not repeated.

SCB and SCB Abacus announces success of AI-powered lending platform for SMEs on Lazada

The new solution marks Thailand’s first e-marketplace end-to-end digital lending platform and reinforces SCB’s industry leadership

Siam Commercial Bank (SCB) announces the success of “Clickcash” (Mae Manee Sri Online), Thailand’s first end-to-end digital lending platform for SMEs. The platform leverages AI and machine learning technology developed by SCB Abacus – an advanced analytics spin-off by SCB. Designed for SMEs on Lazada e-marketplace, the new online SME loan takes only 15 minutes for loan approval with an interest rate as low as 1.59% per month. Service has expanded from Bangkok to 20 provinces across Thailand. This success marks the first end-to-end digital lending platform in Thailand’s banking industry, allowing SMEs to access funding with ease to increase liquidity and expand their business to stay competitive in the age of thriving e-commerce.

Mrs. Pimolpa Suntichok, Senior Executive Vice President and Head of Commercial Banking Solutions, Siam Commercial Bank, said that, “As the customer behavior changes, businesses of all sizes, including SMEs, need to consistently adjust their strategy to keep up with the disrupted market landscape. Siam Commercial Bank understands the importance of leveraging technology to drive business growth, and strives to develop a comprehensive digital banking platform (“bank as a platform”) in order to maintain industry leadership. This is exemplified by the recent revamp of SCB Easy app, the launch of StartBiz app, and the platform SCB Business Anywhere to serve as a tool for corporate customers to operate their businesses. In addition, we continue to create synergy with several partners to strengthen our platform while provide businesses with opportunity to access new technology. SCB’s partnership with Lazada, the largest e-commerce platform in Southeast Asia, reflects the bank’s vision in promoting financial inclusion and business growth, with SCB Abacus as the technology provider in developing the innovative solution of Clickcash lending platform.”

According to Dr. Sutapa Amornvivat, Chief Executive Officer, SCB Abacus “Today, there are many Thai SMEs on e-commerce platforms with strong growth potential but are unable to expand their businesses due to lack of financing. The traditional lending practice of commercial banks favors only well-established SME businesses, involves a lengthy loan approval process, and requires large amounts of documentation. The goal behind the development of the lending platform is to help SME businesses expand by answering to the increased needs for on-demand services within limited timeframe and facilitate end-to-end digital processes. As result, our digital platform benefits from reduced operating costs which translate to more favorable interest rate for customers. The loan process is enabled by AI and machine learning technology for credit scoring and personalization of appropriate loan terms and credit line. These process can be completed within 15 minutes without requiring any paperwork. This contrasts with the traditional banking process which can take between 3 days up to one week.”

SCB has piloted this platform on the Lazada e-marketplace since June 2018. The service has received overwhelming responses from customers and yet to record any late payments. The success of the digital lending platform in leveraging innovative technology to enhance customer experience is recognized international awards and accolades, including the Global Retail Banking Innovation Awards 2018 in Best Data Analytics Initiative category, hosted by The Digital Banker and the IDC Digital Transformation Awards 2018 in the Digital Disruptor of the Year category, hosted by IDC (International Data Corporation).

Mr. James Dong, Chief Executive Officer, Lazada Thailand further added “Sellers on the Lazada are able to access funding with greater ease than before especially in periods of peak demand such as the annual Lazada 11.11 Shopping Festival campaign. This campaign has shown the exponential growth of the e-commerce industry in with a record number of 20 million shoppers within the first 24 hours across Southeast Asia. The collaboration between SCB and Lazada has uplifted the financing experience for SMEs – helping Lazada sellers to respond to the market rapidly. SCB Abacus’s technological edge and agility has further elevated the partnership enabled us to build a platform which provides value for our sellers. SCB’s digital lending platform has helped Thai SMEs to remain competitive, which coincides with Lazada’s vision of building a sustainable e-commerce ecosystem in SEA with the goal to support 8 million e-commerce and SME operators by 2030.”

Miss Pattama Pumchat, owner of Tiger Riding Shop, a seller on the Lazada platform who has applied for the Clickcash loan, revealed that “SCB’s new digital SME loan has helped me to expand my business quickly and survive in the ever-changing market. The approval process is fast. All I needed to do was to complete online application – no need to visit the bank in person and prepare masses of paperwork. This gives me more time to focus on operating and growing my business.”


Singapore FinTech Festival 2018


At the world’s largest platform for the global FinTech community – The Singapore FinTech Festival, CEO of SCB Abacus, Sutapa Amornvivat, PhD participated in a panel on “AI in ASEAN” in discussing the important challenges and opportunities that AI technology brings to the region.

She is joined by leading AI visionaries and experts Samuel Tsien of The Open Vault at OCBC, Charles Ross of The Economist Intelligence Unit (The EIU), Campbell Wilson of Singapore Airlines, and Steve Leonard of SGInnovate in providing insight into ground-breaking impact of AI in the financial industry and beyond. A truly stimulating discussion between the panelists with thought-provoking questions from the audience.

Op-ed: Important lessons from a chatbot developer

Author: Sutapa Amornvivat, Ph.D.
Published in Bangkok Post newspaper/ In Ponderland column 31 October 2018

The smoother and deeper our conversation with Siri, (or with Alexa, Bixby or Cortana for that matter) the more realistic Dan Brown’s Winston in Origin becomes. Many experts are predicting that demand for new mobile apps is slowing down with the next trend for user interface being chatbots. Of course, much more work in conversational AI will be necessary before we reach Winston’s level of chatbot advancement. At least now, users are becoming more familiar and as a result, these interactions provide a constant source of data for machines to “learn”.

Many retail companies are utilising a chatbot platform for various use cases ranging from customer support to recommendations of products and services. According to Oracle, 80% of businesses polled in France, the Netherlands, South Africa, and the UK last year said that they will resort to chatbots by 2020. In fact, one French-based multinational beauty chain already has three chatbots, one to assist in makeover reservation, one to help customers match colour shades, and the other to offer makeup tips and how-to videos.

It is no surprise that Thai businesses are jumping on the bandwagon, especially with the Thai population being so reliant on chat apps that we frequently chart in the top 10 for global social media usage. When such clear business value is involved, the rate of developments in Natural Language Processing (NLP) techniques within AI can be expected to accelerate. Many cloud services are already expanding to cover Thai language and offering standard tools to guide non-programmers to build chatbots themselves.

We at SCB Abacus have launched a number of chatbots this year. One of our first chatbots, “Puek Hom”, is an expense tracker chatbot on Facebook Messenger. We learned that Puek Hom is more versatile than expected, attracting not just millennials but also Gen X users. This gives us hope in the potential of chatbots within the competitive market of personal finance. The most recent chatbot, “Perm Poon”, developed for SCB Asset Management, can now handle lengthy interactions and advise on complex products, such as mutual funds.

Our experiences in developing these chatbots tell us that making a great chatbot is more of an art than science. Here are five things I want to share with Thai corporations looking to build chatbots in the future.

A great chatbot needs a persona.

You need to do research and understand target persona for an effective communication style. Diverse skills are required, such as user experience and content design, not just software development. All these skills are an essential part to a user-centric product design because they ensure that you serve your users’ best interests. Humanisation is even more crucial — chatbots should be able to replicate how your best agents interact with different types of customers, especially as the bots may not always know what to answer.

A great chatbot is personalised.

A great chatbot learns from each individual’s conversation history and other peripheral data and responds accordingly in real-time. Imagine a food delivery chatbot that can recommend restaurants based on previous chat history, previous orders and current location, instead of asking users to go through the same back-and-forth chat every time. Building a chatbot capable of personalisation requires technical knowledge of database architecture, and the ability to integrate internal and external data systems.

A great chatbot must be able to hold a conversation.

To keep users coming back to use the chatbot, it is crucial to keep the conversation flowing and engaging. This means that, like in a good human-to-human conversation, there is never “dead air”. One way to do so is by adding value to the conversation by anticipating users’ needs based on previous chat history, without being explicitly asked. A seamless experience can also help. A good chatbot should have omni-capability where conversation flows seamlessly across channels.

A great chatbot should know its own limits.

Having a chatbot for customer service is quite well-received globally, with 45% of users around the world preferring chatbots to humans, according to a 2017 poll by a market research firm Grand View Research. However, this will differ from industry to industry, as it can be difficult to create a personalised experience for certain products. So where do you draw the line? It goes back to the first point I made about knowing your target audience. Often it can be difficult to know for certain before the chatbot launches. Therefore, one must have be quick to reiterate the chatbot in short periods to retain and engage customers.

Developing and maintaining a great chatbot is a long journey.

Like other AI products and especially NLP tools in Thai, a chatbot needs continuous improvement and huge data training process to enhance its ability to handle various types of conversations. It is also important to note that a chatbot cannot solve everything. Companies such as Amtrak has created an additional chat-tree where, if reached, users can get in touch with a real customer service representative for questions that require human attention.

A great chatbot is a significant investment in terms of cost and time. It is arguably more beneficial to companies with large customer bases, but it can also benefit smaller companies looking to expand from niche to mass markets.

Not only will we see chatbots becoming the interface of choice, but they will also continue to disrupt our search behaviour. Currently, Siri and its Android counterparts are capable of offering a list of general information, but lack domain expertise to provide “the one right answer”. On the other hand, chatbots that businesses build will possess such domain expertise, but how do we ensure that those chatbots are discovered?

Instead of having to browse through a list of information provided by Siri, perhaps we will see a future where multiple chatbots will collaborate with one another to deliver that one right answer straightaway.