Banking on change
Simon Loong, founder of peer-to-peer lending platform firm WeLend.hk, aims to transform borrowing through new technology
Technology has greatly affected the lives of people around the globe, with the internet and new communication channels bringing people closer together and drastically changing the way information is delivered.
However, one industry remains relatively unaffected by technology – the practice of money lending. So says Simon Loong, founder and CEO of WeLab, the technology firm behind Hong Kong’s first peer-to-peer lending platform, WeLend.hk.
Loong, a veteran banker and certified public accountant, worked in the personal loan sector for major banks for more than 15 years before founding WeLab in Hong Kong in 2012.
“My last banking job was as head of unsecured lending at Standard Chartered Bank,” Loong says. “In 2011, I went on sabbatical leave to visit the US. There I became involved with the idea of developing peer-to-peer lending in Hong Kong, after seeing how individuals and small businesses make use of online peer-to-peer lending platforms to fulfil their financial needs.
“After the financial crisis banks were losing credibility, and as a result, the demand for peer-to-peer lending has never been higher.”
Inspired in the US by SoFi (Social Finance), a platform that helps students pay off college debts by borrowing money from alumni, Loong came up with the idea for WeLab.
“Hong Kong is a mature and well-developed financial centre, but the lending business is too narrow. Most of the time, people can only go to banks to get a loan. In the past 15 years, technology has revolutionised the way we shop and I think the way we borrow money needs a revolution too.”
Since the 2008 financial crisis, more people are looking for solutions that involve bypassing the banks for loans, Loong says. Solutions are now available thanks to new technology.
“Like all other money lenders, WeLab is regulated in Hong Kong under the Money Lenders Ordinance, but we operate in a way that is very different from banks,” he says.
WeLab is an online platform and therefore does not involve the same operation costs as a bank. “We are able to offer competitive interest rates because we remove the middlemen and other complexities from personal loan transactions,” Loong says.
Interest rates are not borrowers’ only concern; efficiency and simple procedures are also important, Loong adds. “Our service is quick and simple. You can get your loans application started by sending photos of your income statement and other documents through your phone. There is no need to fax documents or visit the bank in person to hand in documents.
“Banks may take a few working days to inform borrowers if the loan is successful or not, but we can confirm everything in a day because of the technology that we employ.”
Penalising early-returns is a common practice among banks, but Loong believes that such a practice is worth reviewing by the industry.
“Having worked in the loan business for so many years, I think banks need to be more flexible and transparent with their loan policies,” Loong says.
“The bank is discouraging borrowers from returning the money, so it can earn as much interest as possible. This can be frustrating for borrowers. However, WeLab borrowers can choose to return the money early with no extra charges.”
Another wider industry change Loong hopes to see in the industry is more education on the borrowing process. “Every person has a credit score, a number that decides the interest rate for loans,” he says.
“Unfortunately, most people in Hong Kong – the financial centre of Asia – do not have a clue what their credit score is. Managing your credit without knowing your credit score is like trying to lose weight without knowing how much you weigh.
“Banks never explain to borrowers how credit scores work, and so borrowers are left in the dark, not knowing what they can do to reduce their interest rate.”
One of WeLab’s aims is to educate borrowers about the importance of credit score management. “We developed WeScore, an easy and intuitive credit score system that aims to educate borrowers on how to better manage their credit behaviour.
“We are serious about revolutionising the debt loan business by letting borrowers know how the business works so that they can secure the best interest rate.”
Since Loong started the lending service in April, WeLab has had most success with borrowers in their 20s and 30s. “We now have more than 6,000 members, and have lent more than HK$300 million,” he says.
Despite its success with the lending business, however, Loong stressed that WeLab is not a financial institution but a technology firm. “What sets us apart from others is our technology,” he says. “We have developed a system that allows borrowers to borrow money quickly and, at the same time, uphold high security standards.
“A number of banks have contacted us about how we can collaborate by making use of the technology.”
Loong is confident that peer-to-peer lending will grow by leaps and bounds. “The internet has allowed more and more transactions to be made without the interference of a bank,” he says.
“The market will always be looking for alternatives. “Good decisions come from choosing different alternatives and these are being created through innovation,” he says.