Fintech Lending and AI Driven Credit Growth

MoMo wants to lend more

This week’s theme is fintechs looking to lend money. Let’s start with MoMo, MTN’s mobile money service, and the fintech arm of Africa’s largest telco. As TechCabal notes, telco-backed payments service banks are yet to scale, and they are looking to follow the strategy of OPay and PalmPay in Nigeria. MoMo has 3.7 million active wallet users but its ambition is to grow that number tenfold, and MTN is looking for fintech to become a critical growth engine along with increased digital services to the home through fibre.

“For MTN, it is leaning heavily into distribution: more agents, more merchants, deeper rural penetration. Its agent numbers are up nearly 50%. This aligns with how OPay and PalmPay captured the market when they began. “Core fintech revenue includes the cost of facilitating transfers, which are priced low, and interest earned on customer deposits.” MoMo is now eyeing a lending licence with discussions ongoing with the Central Bank of Nigeria. “GSMA, the global industry body for telcos, has argued that regulatory restrictions, especially regarding lending, have limited the broader uptake of telco-led fintech in Nigeria. While MTN is not looking towards acquisition to boost MoMo’s standing, it is not ruling it out.”

…while TikTok wants to start lending

TikTok wants to evolve from the favourite social media app of the younger generation to a fintech, with Brazil as its first target market
outside China. “Social media platform TikTok, controlled by China's ByteDance, is seeking approval from the Brazilian central bank to operate as a lending and payments fintech, according to two people with direct knowledge of the matter,” reports Reuters. “The ‌sources, who requested anonymity because the plans are confidential, said TikTok has applied for two licenses with the regulator. One would allow it to operate as an ‘electronic money issuer’, offering prepaid accounts for users to hold balances, receive funds and make payments within its app.” Not incidentally, ByteDance is an AI powerhouse, and it claims 170 million users in the US, which no bank can claim. TikTok has promised to invest tens of billions in a data centre in Brazil, where it has 130 million users. “If approved, the move would allow TikTok to offer a suite of basic financial services to Brazilians, running a playbook popularized by Nubank, now the country's largest digital bank.”

…and banks are waking up to the small-value AI-driven loan

The Asian Banker carries an interesting read that looks at how banks are planning to deploy AI. One emerging theme is the automation of credit decisions, and particularly the growth of small and frequent loans delivered via automated platforms: think of WeBank, which has been doing this for ten years, or NuBank. “Nu Holdings illustrates how AI can be embedded from inception. As a digital-native bank, its infrastructure was designed around data and automation. Vélez described proprietary models integrated into underwriting and customer interaction systems that enable rapid scaling of small-ticket lending while maintaining portfolio discipline.” Bear in mind however, that AI-driven credit is happening at scale through operators such as Optasia, which offers automated frequent small-scale loans for airtime credit or pre-paid electricity credit. “AI in banking ultimately depends on data architecture,” writes Foo Boon Ping. “Without consistent data pipelines, integrated systems and scalable infrastructure, even the most sophisticated algorithms cannot operate effectively. For this reason, many banks now describe AI deployment as inseparable from broader data modernisation programmes. Data lakes, cloud-based infrastructure and application programming interfaces (APIs) are becoming essential components of modern banking architecture.”