Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly, on October 10 - 16, 2016.

 

With the launch of MoneyLion’s personal finance app in Malaysia, local consumers will now find it easier to monitor and manage their finances. So far, the US-based company has teamed up with CIMB Bank, Maybank, Public Bank and RHB Bank to provide this service.

By using the app, users can monitor their various bank accounts on a single platform. The analytical tools help them keep track of their spending and saving activities across their savings, credit card and investment accounts so that they can see if they are meeting their financial goals. 

When there are enough users on the platform, the app’s artificial intelligence will be able to provide feedback, such as how the users’ spending patterns compare with those of their peers and how much of their income is spent on a certain category.

MoneyLion CEO Diwakar Choubey says the company has taken a step further by analysing all of the users’ transactions, unlike the other apps in the market today that only give a static view of the users’ bank accounts. “We use machine learning to help consumers track their spending and make the right financial decisions. Let’s say you get paid on the 15th of every month. Here is how many days you have until you get paid again. Here are your 10 recurring payments. And here is how much you have allocated to spend on a daily basis,” he adds. 

“If a user links three bank accounts, we will know exactly how they spend and how their bank balances fluctuate. If they have RM10,000 in their CIMB account, the app will suggest putting that money in a mutual fund. Some people always say they want to invest. But a year later, that money is still in their bank accounts when they could have earned 5% from it. That is the gap that we are trying to bridge” Choubey tells Personal Wealth on the sidelines of the MaGIC Academy Symposium 2016 (MA2016), where he was one of the speakers. 

If a user accepts MoneyLion’s recommendations, they do not have to fill in any forms. As the app already has his information, he can express his desire to invest with only a few clicks. The app then sends all the necessary information to the bank with the user’s consent. 

“This will be a lot easier than logging into a different website and having to fill in something again and again. We will control the user experience from end to end, just like how easy it is to hail a taxi with Grab,” says Choubey. 

In the US, the platform already uses data analytics to provide financial advice to users. It does this by benchmarking their habits with those of their peers in a particular demographic. MoneyLion is currently trying to gather more data on its Asian users to provide this service in this part of the world. 

“In the US, we have tons of data. We have US$10 billion worth of transaction value data being analysed, so we are able to give richer advice, based on the consumer patterns. Here, we are just starting out,” says Choubey.

“As we get more users on the platform, we can use the data to inform them how much people in their economic zone are spending, so they can benchmark for themselves. For example, you may be spending too much on on-demand television, or you may be spending too much on ride-hailing services, or maybe you drink too much expensive coffee.” 

For its Asian version, MoneyLion will focus on wealth management offerings instead of online lending, like its US version. Choubey says this is because consumer behaviour is very different in these parts of the world.

“In the US, people tend to borrow more because people there generally spend more than they earn. In the Asian market, it is all about building wealth,” he says. 

“Asian economies are generally growing between 5% and 10% yearly, so people will have a lot more money in the next 10 to 15 years. That is why we are in the development of helping Asian consumers build wealth.”

In the future, MoneyLion aims to create a marketplace for different financial products in Asia. Soon, multiple banks, credit card companies, money lenders and mortgage companies will be able to use the platform to push offers to consumers with the right needs, as determined by the users’ transactions. 

On the concern over how secure it is for users to link their bank accounts to the app, Choubey says the app is “read-only”, meaning it only has access to their data but not the permission to make any transactions. Additionally, all data is stored on Payment Card Industry Data Security Standard-compliant servers and the app uses a state-of-the-art bank-level encryption technology. MoneyLion will not have access to users’ banking account passwords and will not be able to withdraw funds. 

 

Scaling the Asian market

Choubey says for financial technology (fintech) companies to grow exponentially, it is very important that they work with the traditional banks. MoneyLion has worked with many of the large US banks. Recently, it also inked a deal with Australia’s Macquarie Group. Collaboration is important because fintech companies are more nimble and better at customer acquisition, he adds. 

“We are also able to give consumers unbiased advice. For example, MoneyLion is able to tell clients that CIMB Bank is offering a cheaper interest rate on this product than Maybank, so consider switching. Or Maybank is giving a better mortgage loan, consider switching. Whereas if it is just a single bank, it only offers its own products. That is why fintech companies have the opportunity to acquire more users.”

In Malaysia, MoneyLion will focus on offering the loan services of its banking partners, says Choubey. “In the US, we are regulated by the Federal Deposit Insurance Corp and state regulators. We are the actual lender in the US, so we have to use a regulation-heavy model. In Malaysia, we are not the lenders; we are just the marketing agents for the products.”

MoneyLion is working with vendors in Malaysia to enable a rewards programme that helps users inculcate healthy financial habits. The programme is expected to be launched in the next six months. While its target market in the US is the middle class, the company is targeting millennials and the urban population in Malaysia who want to optimise their finances.

In its Asean strategy, MoneyLion is offering the app to the Malaysian market first before expanding to Thailand, Singapore and India. “We are very excited to expand into Asia. Malaysia is a natural candidate because we have an office here and we have a lot of Malaysians working for us, including my co-founder, Chee Mun Foong. Malaysia is going to be our hub for developments in Southeast Asia and Australia. We have a lot to anticipate from these developments,” says Choubey. 

The MoneyLion app is available for free on the App Store and Google Play.

 


How MoneyLion started

MoneyLion was launched in the US to fill a gap in the financial system after the credit crisis in 2008. The following year, the US government forced the financial sector to consolidate, which drove innovation. 

The industry players had the opportunity to rewrite business models that had been in place for 30 years. This was where MoneyLion CEO Diwakar Choubey saw an opportunity to marry big data analytics with traditional financing.

MoneyLion started as a holistic financial wellness tool in 2013. The artificial intelligence it used provided users with “what if” scenarios, says Choubey. “When you link your bank accounts, it tells you what financial product you should be looking at next. For example, we know you spent US$10,000 more than you did last month, so consider taking a loan. If you are spending too much on Uber, consider taking a ride on the subway.

“We were able to use machine learning and parallel processing techniques to come up with very sophisticated analysis that in the past were only limited to private bankers and people with a lot of money. The demonetisation of personal finance is happening before our eyes. This is just one example of the informative tools we can build for the masses using the technology platform that we have created.”

Gradually, MoneyLion began to offer online lending to users in the US. Choubey says borrowing through the platform is a lot easier than borrowing from banks, so it proved to be very successful model. “Our processing is done online, so people can get loans of US$500 to US$35,000 in just 5 to 15 minutes. Banks can’t provide that, that is why users choose us.”

He observes that American consumers do not really care about fancy analytics. What they really care about is a delightful user experience. 

“One of the key technologies we built was leveraging bank transaction data to predict how consumers would repay our loans. The data allowed us to tailor financial products for the users, thereby reducing non-performing loans. Our proprietary algorithms ended up outperforming a lot of the data bureaus that persisted in the US and that became our biggest advantage over the banks,” he says. 

One of the unique features offered by MoneyLion is that users are able to reduce their interest rates by linking the app to their Facebook accounts. When Choubey first announced this feature, their investors expressed doubts over whether the move would work. 

“We were told that no one was going to link their Facebook accounts to give us access to their data. But we completely changed the dynamics because there was monetary barter involved. They are paying us with data and their social capital for a lower interest rate,” he says. 

“We then used that data to build an endorsement platform, where users are able to have lower interest rates merely by increasing their social network. So, we took you from what used to be wearing your best suit and tie, going to the bank and letting your banker make visceral judgements on your credit quality, to letting your social capital determine your interest rate. We saw a lot of success in doing that.” 

MoneyLion has collaborated with gift card vendors Amazon and Best Buy to reward users with good financial habits. Choubey believes that the rewards system will increase the probability of users paying off their loans. Through this programme, consumers have redeemed US$3 million worth of points. 

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