Alternative credit scoring fintech company CredoLab has launched in South Africa to help financial institutions and other lenders credit score more people, especially those who are new to bank and new to credit.
Launched in Singapore three years ago, CredoLab develops bank-grade digital scorecards using smartphone device metadata.
“You need a credit score to participate in the economy but how can someone with no credit history get a credit score? And how can they start a business if they can’t lend money to do so?” asks CredoLab’s sales director for Europe and Africa, Michel Massain.
“By harnessing the power of Artificial Intelligence applied to smartphone data, we allow lenders to credit score people that traditional methods can’t. This use of predictive analytics for credit scoring enables financial services providers expand their pool of borrowers while keeping risks under control,” says Massain.
Too many people are invisible to lenders because of a lack of data for risk assessment. Traditional credit scoring has become inadequate, opening the door for informal and rogue money lending and keeping underbanked people out of the economy.
“We started up to solve on one problem: the lack of instruments available to assess the credit worthiness of nearly two billion consumers globally,” says Massain.
CredoLab signed up two banks and a leading airtime credit provider in SA earlier this year. Massain was in the country last week meeting other large financial institutions, credit bureaus and consumer lenders.
CredoLab collects more than 50 000 data points from a customer’s smart phone through a state-of-the-art propriety mobile technology, and turns them into more than 500 thousand behavioural features. Their collection process is always consensual and permissioned. The collected data is anonymised, securely stored within the country, and never shared with third parties.
“Given the rapid expansion of smartphone penetration, our proprietary algorithm uses anonymous, non-personal, consented smartphone metadata to predict the creditworthiness of users. We are enabling millennials, new graduates, self-employed and other thin credit history customers access credit and receive loans on fair terms, even in the absence of a credit history,” says Massain.
CEO and Co-Founder of CredoLab, Peter Barcak says, “Too many people remain locked outside of the mainstream economy. Our hope is that CredoLab will help to remove a key barrier to entry in SA and on the African continent and complement traditional credit scoring systems with the power of behavioural data.”
In just three years, CredoLab has become an award-winning fintech business delivering better credit decisions to 51 clients in 15 countries. It has powered almost USD 1-billion in loans issued after analysing about 1 trillion data points. Making granular credit assessments possible, their clients have seen results like 20% higher new to bank customer approvals, a 15% reduction in non-performing loans, and a 22% dip in fraud rate.