What happened?
- Founded in 2015, Validus is headquartered in Singapore and licensed by the Monetary Authority of Singapore as a digital financing and credit investment platform for small and medium-sized enterprises (SMEs), with its main markets in Indonesia, Singapore, Thailand, and Vietnam, and has disbursed more than US$2.8 billion in loans to small businesses across Southeast Asia.
- While traditional financial institutions have a "one size fits all" approach to financial services, Validus is the first company in the industry to develop an artificial intelligence credit underwriting algorithm that can automate the underwriting of small working capital loans up to US$150,000 and credit risk decisions in just one minute.
- Validus uses data from its partners to develop AI-enabled creditworthiness models to price SMB risk and make the credit scoring and underwriting process more efficient. Customers only need to provide two documents online to conduct a credit assessment, dramatically reducing documentation by 67% compared to banks and other financial institutions.
- Validus has developed a one-stop financial solution that incorporates data analytics, machine learning, and AI and has been recognized as one of the top three players in the SME Neoplayer of the Year at the Qorus 2023 SME Banking Awards by the financial services organization.
Focus on SMEs?
According to the International Federation of Accountants (IFAC), the ASEAN economies are mainly composed of small and medium-sized enterprises (SMEs), which account for about 89-99% of the total number of enterprises in ASEAN member states and 52-97% of the total number of people in the workforce, and have a significant impact on the Southeast Asian market.
- Due to their small size and low revenue, SMEs have difficulty obtaining capital, have weak collateralization ability, or are newly established and need more turnover for banks to check. The approval rate of their applications for corporate loans is not high, and they are generally regarded as "high-risk, high-cost" credit, which makes it difficult for them to obtain financing.
- Vishal Shah, Group Chief Operating Officer of Validus, pointed out that SMEs are a massive driver of job creation in Asia but have serious funding gaps, and the time-consuming and slow process of applying for a loan from a traditional bank has made it impossible for them to obtain adequate loans.
- Vishal analyzes that while Singapore has a dedicated SME department, it focuses on white-collar or preferred industries, and there are still a lot of underbanked and underserved SMEs in the market, estimated to be 60 million in Indonesia and about 7 million in Vietnam.
- Validus helps clients build a high level of brand loyalty from the earliest stages of their business. One customer went from a small team of 10 to a business with over $10 million in revenue and continues to work with Validus.
Digital tools to speed up the loan application process?
- Validus launched digital lending during the pandemic, whereby customers could apply for a loan on a digital platform, provide six months of bank statements and a report from the Singapore Credit Bureau, and find out if the loan was approved or denied within five minutes.
- Vishal explains that this feature is based on Singapore's high level of digitization, where the government has a well-established database that allows for quick access to information from government records and eliminates the need for customers to upload identification documents, articles of incorporation, etc. This makes it easy to apply for a loan on the digital platform. This ease of access to credit has earned Validus first runner-up honors at the SFF Global Fintech Awards in 2022.
- Validus has also launched a corporate account that provides Singapore SMEs with a full suite of corporate financing services, including managing company cards, expenses, foreign exchange, and other functions using an app, with no minimum deposit amount and handling fees for domestic transfers.
- Indonesia, Vietnam, and other countries need to be digitized. Vishal mentioned that in recent years, more and more small or medium-sized traditional banks are welcoming newcomers to join them. Banks are providing loans, and startups are providing online services, and there is a tendency for banks and newcomers to cooperate rather than compete with each other.
What's in the future?
- Validus has already entered the Singapore, Indonesia, Vietnam, and Thailand markets, with teams familiar with the local financial systems in each country. In the future, we plan to continue to develop new digital economic models, realize financial inclusion through affordable and straightforward financing, and expand to the Philippines and Malaysia to become the most popular credit and financial service provider for SMEs in Southeast Asia.
- Vishal shares that by assisting SMEs with financing, especially micro SMEs that banks overlook, Validus' ultimate vision is to improve the overall ecosystem of SMEs and enhance the lives of business owners and their employees.
As the financial industry is highly regulated and financing SMEs is risky, how does Validus balance digital technology and financial security? How does Validus balance digital technology and financial security, and how does the startup play an influential role in digitalizing the financial industry? Read the in-depth Salon Talk between Sunrise Medium and Vishal Shah, COO of Validus.
