Financing is a term that has crossed the minds of most, if not all, Small to Medium Enterprises (SMEs). Many see it as a means to live their dreams on the basis of using the loan as startup capital or for additional capital expenditures when expanding. Of course, this is rarely the case for most SMEs in the Philippines. There are too many factors in today’s market like inflation and cutthroat competition that would prompt an SME owner to get financing, especially if the goal is to survive the market and scale the business further. When SMEs do think about financing they usually think about the stress they would encounter from going through the process. Most would also worry about having no collateral, which banks require while others start to count the cost of opportunities or profit lost in consideration of the interest rates that come with their loans.
As more and more FinTech startups join the industry to provide more convenient financing alternatives to traditional banks and institutions, SMEs are given more leverage when it comes to deciding on a financing provider. The same considerations in FinTech would come to play but with priority going to the speed and convenience of the financing service. Convenience, meaning, it would require less documents compared to your average bank - while speed pertains to the fastness of loan disbursement. Logically, interest rates equally rank high among factors when considering who to get financing from. Credibility, in terms of legitimacy. They should be registered with the Securities and Exchange Commission (SEC) - and the types of investors who back-up the firm would add value to its credibility as well, and reinforce its capacity to finance clients.
If you’re an SME owner looking to get financing from a FinTech company and have the same consideration as the above, it’s also high time to include your financer’s business practices when it comes to handling your account, your data privacy and security, in every step of the customer journey.
Why Security is Important When getting Financing
The local FinTech industry is increasingly growing more complex, with institutions offering different products for your every financial need. Nonetheless, whether you are getting financing for individual or business loans, FinTech companies would require you to send personal and business information. The information you send may seem basic but can actually be harmful to you and your business when not used carefully.
The Data Privacy Act of 2012 ensures that businesses are transparent when it comes to collecting and using the personal information they get from all stakeholders. Stakeholders include both internal and external audiences, including those who simply visit their website.
In summary, the Data Privacy Act (DPA) of 2012 that was established and is being implemented by the National Privacy Commission (NPC), aims “to protect the fundamental right of privacy, of communication while ensuring free flow of information to promote innovation and growth.” (Republic Act. No. 10173, Ch. 1, Sec. 2).
Legal entities, such as all FinTech companies (for the purpose of this article), are thus expected to implement the DPA’s principles of transparency, legitimate purpose and proportionality through a Data Protection Officer who ensures its proper implementation throughout the firm’s supply chain. In operationalising these values FinTech firms must adhere to, the most basic steps would be to get the formal consent of all applicants who will be submitting personal information; obtain the data by legal means and; only gather relevant data needed to process the loan disbursement. If a company uses your company’s information beyond the scope of its business needs then they’ve already breached the DPA.
The harm of bad data privacy practices
Many individuals are now aware of their high-risk vulnerability when providing their personal and business information. At industry average, most companies are supposedly in compliance with the DPA 2012 stipulations as communicated on their websites, telephone hotlines, contracts, etc. but what SMEs sometimes neglect to check is how they implement the DPA. In the greater scheme of things, SMEs are too busy to check the fine print for the DPA and forget to clarify this with their financing partners. Let’s face it, SME owners cannot be bugged down by one more step and would have to get to work quickly.
For the unlucky ones, the harm done is getting their “dirty laundry” aired in public or being harassed unfairly by third party agencies to pay their loans. These examples are in clear violation of the DPA and such acts are not worth the speed, convenience and low interest rates offered. Unfortunately, there have been more than 400 complaints filed with the NPC with regard to these violations. It would definitely provide value to be mindful about your business’ privacy and security before deciding to take a loan from FinTech companies even by simply discussing this concern with your assigned sales agent. It’s good to know how they actually implement the DPA throughout their operations.
Financing with a firm you can trust
With the alarming rate presented in the news of financial companies irresponsibly using their clients’ data as a scare tactic, it cannot be stressed more to partner wisely with such institutions. Just last month, government agencies and regulators, and FinTech Alliance Philippines formalised a new code of conduct on responsible online lending. It essentially enforces all members to implement all stipulations of the DPA 2012, specifically in transparency, not using abusive collection practices, conducting responsible data usage, preventing excessive disbursement of loans, and more. This should ensure individuals and SME owners that FinTech companies are expected to strictly adhere to the DPA. If not, companies who violate this will be sanctioned.
At First Circle, we do not engage in any of the malpractices that violate the DPA 2012. Since 2018, we have not only adopted the DPA and incorporated it to both internal and external business operations and partnerships, but continue to work together with government institutions and regulators such as the NPC and the SEC to find better ways of protecting the privacy of our clients and even of our employees.
Our Collections Team is fully guided by the DPA terms as set by our Governance and Legal Departments, through our Data Privacy Officer. They maintain only the best professional standards when dealing with clients. First Circle is also very confident in our backend IT systems in terms of storing the data we collect from our clients. We have engaged a highly reputable cybersecurity firm to help us with our Data Privacy and IT management.
With the trust First Circle has been given by its partners and Government agencies, we pay it forward by safeguarding the trust our valuable clients have entrusted us. We believe in building and nourishing all our client relationships and that begins with ensuring all business processes are implemented well based on that trust.
First Circle offers short-term business financing services to assist SMEs who need to fill temporary capital gaps. Through our business loans, businesses are given more opportunities to expand their operations and support their growing clientele.