Starting in 2010, the Chilean company Tiaxa began offering prepaid mobile subscribers balance advances that fund their cellular voice, text, downloads and data consumption if their prepaid balances run out. Now offered in 12 countries in Latin America and Asia, these advances typically come in the form of unsecured nano-loans that are less than one dollar each. This Tiaxa Online Balance Advance service is proving popular, as Tiaxa now provides more than 50 million advances each month. Tiaxa’s service is demonstrating that Big Data credit applications beyond Alibaba’s model are operating effectively and at scale elsewhere in "data-lite," low-income markets.
Perhaps the key success factor for Tiaxa has been that for the first time this type of advance has been done seamlessly. This means that if the subscriber has been scored positively by Tiaxa’s proprietary algorithm and has opted in to the service (by responding to a short promotional message), the transaction will be completed without any interruption or need for further interaction by the user or MNO. In this way Balance Advance differs from other on-demand credit offerings which require users to take a specific action in real time. Maybe even more important is the fact that in Tiaxa’s model, these advances generally come at no additional cost or interest charge to the end user.
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By applying Big Data mining to analyze their MNO clients’ millions of prepaid transactions across multiple dimensions, including consumption and recharge history, Tiaxa is able to objectively and precisely segment the prepaid subscribers according to likelihood of churn in previously impossible speed. Potential clients are then invited to participate in the Balance Advance program via an opt-in SMS message and provided a uniquely tailored credit limit in accordance with their profile. Tiaxa continues to monitor their behavior and adjusts each subscriber’s limit accordingly over time. The effectiveness of Tiaxa’s proprietary scoring algorithm is underscored by the very low delinquency of their nano loan portfolio, which currently is in the low single digits.
In their recent report on Mobile Data for Development, Cartesian & the Bill & Melinda Gates Foundation point to the interaction between MNOs’ Billing and Mediation, Prepaid and Data Warehouse platforms as providing the foundations for analyzing and building a scoring and lending platform for these types of advances. For the better part of a decade before it began offering Balance Advance, Tiaxa had been in the business of providing precisely these types of platforms to mobile operators. This enabled the company to gain a clear vantage point into the massive number of “rejected” prepaid transactions (due to insufficient funds), which eventually prompted them to leverage their deep business intelligence DNA to search for a value-add solution.
Tiaxa’s business model also shows that the value of Big Data can be quantified effectively in some applications. In return for backstopping the risk of clients not repaying their loans at the time of topping up, Tiaxa shares the additional revenue from these otherwise foregone transactions with the MNO. As such this is a win-win proposition as it is seamless and free to the end-user and results in improved revenues and client loyalty for the MNO. (It is important, however, to note that significant integration is required with the MNO’s back-end, to secure the data flow into Tiaxa’s scoring engine, and to be able to effectuate the transactions and risk management protocols in real time).
With the success of this product, Tiaxa has been able to expand beyond its original market in Latin America, with contracts in 14 countries to date. The solution is already operating in the Philippines and Cambodia with excellent results, just launched in China and is about to launch in Bangladesh. Beyond that Tiaxa is in advanced pilots in several other countries and is exploring business development opportunities in Africa, the Middle East and South Asia.
With the scaling up of this Balance Advance product Tiaxa is now exploring expanding these advances beyond the world of top-up credit and into the realm of larger loans that go beyond $1, into the $10-$20 range. The company’s most recent capitalization has helped Tiaxa pursue its first projects focused on working capital credits for air-time resellers, m-wallet lending and other applications.
These younger projects are yet to gain the scale of Tiaxa’s core airtime Balance Advance offering, as they face some important regulatory and operational hurdles. Tiaxa is exploring whether the results are as good in the mobile money space, when replicating the “nano” scoring techniques, the seamless mechanics and other success factors of its older sibling. Figuring out these last few pieces of the puzzle might very well unlock the next mobile financial services “killer app” for Tiaxa.