Exclusive interview with Mila Bedrenets, Chief Growth Hacker at Tonik: “It is very crucial to establish our connection to the financial infrastructure of the Philippines via important key partnerships”.

TDB: In June of 2023, Tonik announced that it had crossed the 1 million customer mark. Please give us an update on the key milestones achieved by the business since launch in March of 2021.

Mila Bedrenets, Chief Growth Hacker, Tonik: In just one month after the launch, we crossed PHP 1 billion in deposits thus proving the point that Filipinos are ready to engage with the concept of a digital-only bank, and avail higher interest rates compared to legacy banks. We were the first to give 6% p.a. interest, and we are happy to say that we were the ones to shake the market – forcing our competition to increase the deposit interest rates in favour of ordinary Filipinos. This is something that we really love to take credit for and communicate to our customers.

Tonik was also the first one to launch cash loan product among all digital banks. We believe that access to credit is one of the biggest challenges for unbanked people, so launching a quick, simple, and comprehensive cash loan was truly relevant to our mission of financial inclusion, and we did it in the end of 2021.

By the end of 2022, Tonik launched Shop Instalment Loan which to date is reaching almost 200 store activations. This was a big milestone for us because this is bringing a digital-only bank on the ground to interact with actual customers via our sales promoters while still maintaining the fast and agile processing of loans in our app.

We have raised USD 131 million in the series B funding led by the leading Japanese bank, Mizuho Bank.

We also launched a secured SME (Small and Medium Enterprise) loan in October this year, which was a big step for a digital bank. Access to credit for SME companies is extremely important for the economy as countries such as the Philippines still have plenty of entrepreneurs struggling to prove to traditional banks their credit history and cash flow. Implementing the world practice of collateralized loans for SME was not easy for a digital-only bank, but we made it happen.

TDB: How important is strategic collaboration with different partners, for Tonik, in terms of its growth story and commitment to innovation in its product portfolio?

Mila Bedrenets: As you know, Tonik is an independent digital bank, the biggest independent bank out of all the six (6) digital banks in the country. Most of our competitors have huge conglomerates and established market players behind them, so for the underdog like Tonik – it is very crucial to establish our connection to the financial infrastructure of the Philippines via important key partnerships. Partnerships enable us in the areas where others might have an advantage by being part of bigger company, bank, or group. Thus, partnerships are extremely important for us. Our biggest partnerships this year were Sunlife Grepa for insurance cross-sell, FC Home, Automatic Center as well as Home Along retail networks for promotion of our shop installment loan; on the group level we partnered with salary benefits company called Tendopay.

TDB: Tell us how the business has inculcated Voice of the Customer (VOC) to continually elevate its digital CX.

Mila Bedrenets: This year we are immensely proud to get The Philippines “Best Customer Service 2023” award, and this is something that we care about the most because it reflects the whole different nature of our company. Being very horizontal, agile, young, and dynamic, Tonik does extra effort and goes the extra mile to keep actual customer`s feedback as close to the decision-making level as possible. Voice of customer is not some department buried deep down in the corporate structure – it is our very culture and our values that is spread all over the company – and those are not just words. We have a special cross-functional working group that include Management Committee members where customers issues are escalated, discussed, and resolved so fast that no traditional bank can dream of. Social media team has direct access to IT, and customer service team is 24/7 in touch with product team so everyone will be on the same page regarding the changes, anticipate impact on customer experience, and inform customers and manage their expectations. We are the only bank that immediately gives that many advisories on this or that partners experiencing downtimes to warn customers. Banking infrastructure is complex so there are a lot of players involved, and each downtime can cause a hiccup and affect the customer experience. We cannot change the reliability of the interbank infrastructure because it is not with us, but the best thing that we can do is to navigate our customers through it.

TDB: What have been the most significant challenges or barriers in driving financial inclusion in the Philippines? Is it a trust or credibility issue?

Mila Bedrenets: This is the ID. The biggest struggle digital banks have on their way to bank the unbanked is proper KYC (Know your customer) procedure. Following strict BSP (Bangko Sentral ng Pilipinas) regulations we need to establish the identity of the customer and there is only limited number of IDs accepted by the BSP, and customers not always possess those. Additionally, with the limited number of IDs accepted, there is also an extremely limited way to verify these documents. So BSP regulated digital banks just literally cannot open the accounts to those Filipinos who do not have proper ID and there are a lot of them.

What should be done for the financial inclusion is unified ID for all Filipinos that is reflected and organized through a government database that should also be available for financial institutions via API for automated verification. I honestly believe that this is the biggest step towards financial inclusion that can be done in Philippines.

Comprehensive credit bureau is also a particularly important part of the unbanked population’s financial inclusion. And it should be mandatory for all institutions that are giving loans to the customer, be that traditional bank, digital bank, lending app or wallet. One centralized easy access is available for every player for easy integration so everyone on the market can both send the data on the customers’ repayments as well as check them. Without proper credit records unbanked customers are forced to take out predatory pay day loans instead of going to digital bank for much cheaper financing.

And as to the credibility and trust issues – this is something that comes from some institutions taking security issues to light. In Tonik we do not rely much on customer education because to us this is just transferring responsibility from financial player to customer. While when we are talking about unbanked Filipinos it would be strange to expect from them to suddenly become financial savvy, prudent and smart in managing their money online. This should be the responsibility of the bank or lending app to ensure hack and scam proof access to funds like we did in Tonik. Due to the packed with different automated verifications onboarding and login journey there is zero chance for someone else to get access to Tonik customers funds after the account is open. I will not share the details, but we used to describe it that we want hackers to get tired of trying and cry.

TDB: Finally, any advice or guidance for new start-ups in the region looking to build their own digital finance platforms or ecosystems. What should be their top-of-mind consideration based on your experience with launching Tonik?

Mila Bedrenets: Do not go big from the beginning, save money, validate the hypothesis, start from smaller MVPs of your product, and never scale up before you reach and prove profitability model. Before you launch the product know very well how you will earn money with it. There are so many nice services you can offer customers, but not necessarily customers are willing to pay for enough to cover your huge infrastructure and development investments. Or there can be too small market of those customers. Way too many fintech start-ups in the world failed due to running out of money and not being able to raise next funding because their product was too raw and not yet proven by the market. Choose your small sandbox to pilot, do not go all big from the start and always have at least 1 year of cash runway in front of you.

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