CEBU, Philippines — Tonik Digital Bank, a subsidiary of Singapore-based TonikFinancial, is committed to reducing the prevalence of the 5-6 lending system in the Philippines by providing non-bank Filipinos with easy access to loans and offering competitive interest rates.
In a press conference, Tonik Digital Bank founder and chief executive officer (CEO) Greg Krasnov said the digital bank is expanding its footprint in Visayas and Mindanao, starting with Cebu.
“Fintech is very good in using alternative data in granting loans,” said Krasnov in an interview, underscoring the importance of predictive analytics in assessing the creditworthiness of borrowers.
This approach, he said allows digital banks or neobanks like Tonik to make informed lending decisions, thereby expanding the reach of their financial services.
He said the emergence of digital banks with more competitive interest rates will empower unbanked Filipinos to avoid loan sharks or those offering the predatory “5-6” lending system, which has long been discouraged by authorities.
The 5-6 lending system is an informal credit scheme commonly found in many Filipino communities. In this system, borrowers usually repay loans with a 20 percent interest rate, meaning they must return P6 for every P5 borrowed.
This excessive interest rate traps many low-income individuals in a cycle of debt, worsening their financial difficulties. Authorities have been striving to reduce this exploitative practice by promoting more sustainable and equitable lending alternatives.
Krasnov, recognized Cebu’s role in the company’s growth goals, observing the positive impact of digital banking on financial inclusion.
Along with its expansion to Cebu, Tonik introduced its Shop Installment Loan product, a new feature that enables customers to purchase their dream home appliances and gadgets with the lowest monthly payments.
The Shop Installment Loan will initially be available at select retailers, with plans to expand to more stores by the fourth quarter of 2024.
With Cebu being the second largest market for financial services in the country, Tonik’s entry is expected to push the bank’s growth and sustain the growth of Tonik’s Point of Sale (POS) network.
The digital bank said it has grown its POS network five times this year, strengthening its position as a top credit-led digital bank, and leader in consumer lending growth in the Philippines.
Since the advent of digital banking in the Philippines, a significant number of unbanked and underserved individuals have been integrated into the financial system.
However, as Krasnov pointed out, there remains substantial potential for growth.
Financial technology, (Fintech) has emerged as a game-changer in the Philippine banking sector. By leveraging innovative technologies and alternative data, fintech has made it possible to extend credit to the mass market, including those traditionally excluded by conventional banks.
“We are here to offer credit access to unbanked Filipinos,” said Krasnov, adding that the neobank’s loan portfolio has now reached the P2 billion mark, with the company aiming to double this in the next 12 months.
“Our goal has always been to democratize banking and provide innovative solutions that cater to the everyday needs of Filipinos,” he added.
Tonik is the first digital-only neobank in the Philippines, providing loan, deposit, and payment products to consumers on a highly secure digital banking platform. The neobank operates based on the first digital bank license issued by the BangkoSentral ng Pilipinas (BSP).
It is led by a team of retail finance veterans who have previously built and scaled multiple retail banks and fintechs across global emerging markets. It is backed by top international investors, including Sequoia India, Point72 Ventures, and Mizuho Bank.
Tonik’s tech stack is integrated in partnerships with world-class banktech vendors including Mastercard, Finastra, Amazon Web Services, Google, Genesys and Daon.
Tonik operates out of hubs in Singapore (HQ), Manila, and Chennai. — (FREEMAN)