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Wednesday, March 29, 2023

A Safe Place: Credit Intelligence Ecosystem Ensures BNPL Businesses Thrive Without Debt – Stockhead

The Credit Intelligence Debt Restructuring and BNPL platforms provide a secure ecosystem that underpins the value proposition of the company.

The BNPL sector has faced tough times recently after falling from its peak in 2021.

Zip Co. saw its share price drop 80% in a year, while Block Inc. is down 50% last year before a strong jump last month.

Both companies are grappling with rising debt, and some experts say that using BNPL services could create a debt trap for active users.

Despite the obvious issues, the sector is still in its teens, with many countries across Asia yet to experience an explosive BNPL lift-off in consumer buying behavior.

ASX-listed Credit Intelligence (ASX:CI1) is one such company that could benefit from the adoption of BNPL in large and wealthy Asian cities such as Hong Kong, which is set to follow the trend in Australia and other Western countries.

CI1’s two-pronged approach to BNPL

BNPL usually splits the purchase into four or six repayments. The first payment is due at checkout, and the balance is usually payable monthly.

But if they lag behind on subsequent payments, it can hurt their credit rating and, in the worst case, put them in a position of default.

And that’s exactly what we’re seeing now, with companies like Afterpay and Zip leading to massive bad debts resulting from consumer non-payments.

CI1 CEO Jimmy Wong says that to mitigate this fundamental flaw in the business model, successful BNPL operations require a strategy to both:

  1. Issuing credit to consumers securely; And
  2. Successfully restructured bad consumer loans so they can still be paid back

“The two-pronged strategy is a core part of BNPL loan issuance to consumers,” Wong said.

“You need a strategy to safely issue credit to consumers in the first place so as to avoid massive bad loans for the business.

“For consumers who are still in trouble with repayments, you need a second strategy to successfully restructure your consumer loans, providing them with the right options so that their loans can still be paid off.”

This two-pronged approach to credit issuance significantly reduces the risk on the business side, and brings great benefits to consumers as they are able to avoid bad credit ratings.

According to Wong, this enables the BNPL business to retain more of its customers instead of holding off on its BNPL purchases.

CI1 may benefit from rising rates

The current rising rate cycle could also hurt borrowers.

As mortgages increase, this may put pressure on people to have credit cards, personal loans and other unsecured facilities like BNPLs.

Chris Mushan, managing director of Chapter Two, an Australian subsidiary of CI1, says an imminent hike in rates could cause a trickle-down effect that could benefit a company like Chapter Two.

“Given Australia’s love of property and the importance of owning a property, mortgage always comes first for Australians,” said Mushan stockhead,

“So when the household budget takes a hit, they are left out of the credit card, personal loan and BNPL repayment list.

“They stop paying them and that’s where a lot of our inquiries in Chapter Two begin,” he said.

Chapter Two is a debt restructuring firm that provides informal loan negotiation and mortgage broking services to individuals facing financial difficulty in Australia.

The company has just launched its new loan management app, which has the ability to list all the loans of its customers in one place, eliminating the need for multiple internet banking accounts and direct debits.

Mushan said most of his customers will be using at least one, if not more, BNPL platforms.

“BNPL is definitely a big issue for the customers. People think it’s free money, but what they probably don’t realize is that they have to pay back the money apart from their mortgage and other payments.”

credit intelligence ecosystem

Outside Australia, Credit Intelligence’s operations in Singapore and Hong Kong can also help people in debt crisis.

The company has a long history of experience in personal lending including its successful Singaporean businesses Hop Ho Credit (HHC)And ICS Funding,

In Hong Kong, it is the largest insolvency and debt restructuring service provider for all major banks.

For CEO Wong, managing credit risk is a skill he has mastered over the years from operating that business in Hong Kong.

Wong said, “My experience in personal loan restructuring and as a trustee in bankruptcy management for all major banks in Hong Kong over many years has given me a great deal of insight into how consumer and corporations are able to access credit. could get in trouble.”

“My understanding of both sides of the equation is how to securely issue credit to consumers to avoid being risk-averse and non-payment on the side of creditors, as well as how to manage personal loans effectively for people who are struggling. Being an expert on how to reorganize from .It is important to pay their required.

“Managing these two sectors efficiently is a key component towards continuing to build a profitable BNPL operation.”

room to grow

Credit Intelligence’s own BNPL businesses currently focus on the SME market, and include the Oneflexi app in Hong Kong and the Yozo platform in Australia.

The Oneflexi app currently serves over 20,000 SMEs in Hong Kong, allowing them to settle corporate and utility bills on-demand in installments.

Meanwhile, the YOZO platform is a product in collaboration with the University of Technology Sydney (UTS), and uses machine learning to help Australian small businesses manage payments and improve their cash flow.

Mushan says that Chapter Two is getting cross-referral business from the YOJO platform.

“If a small business had a $50,000 loan on YOZO and upon review they found the business was struggling to make that payment, they could refer the director to Chapter Two, which would give us access to the credit intelligence ecosystem. can be enabled to complete the business within a closed loop,” said Mushan.

This article was developed in collaboration with Stockhead advertiser Credit Intelligence at the time of publication.

This article does not constitute financial product advice. You should consider seeking independent advice before making any financial decisions.

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