Mumbai-based alternative credit assessment company, CreditVidya, has raised $5 million in Series-B funding from Matrix Partners and Kalaari Capital. The announcement brings their fundraising total to $11 million over the last two years.
CreditVidya is a part of the country’s growing fintech sector, which is expected to earn a 29 percent return on investment — the highest globally — compared to the global average of 20 percent, according to a PwC report.
As an auxiliary component to banks, non-banking financial institutions (NBFCs) and insurance companies, CreditVidya intends to assess and provide reliable credit scoring for the 80 percent or 800 million Indians that lack access to credit, using AI-based alternative data analysis.
While most lenders in developed countries determine credit worthiness using abundant historical financial data, similar institutions in India and other low- and middle-income countries are faced with the challenge that less than one in 10 people have a documented credit history, according to the World Bank.
To overcome this issue, many credit assessment startups have begun relying on AI-powered machine learning to assess data from various sources — including mobile phone records, social media, and even personality profiles — with the intent of accurately assigning a risk assessment profile to previously overlooked borrowers.
CreditVidya’s platform is said to use over 10,000 data points in its risk assessment algorithm, which more than 20 leading lending institutions have already used for underwriting processes.
In addition to the benefit of reaching a previously isolated market of borrowers, CreditVidya’s platform enables lenders to reduce their underwriting costs by 50 percent and cut the turnaround time for loan dispersal from a few days to under 30 minutes.
The money raised by CreditVidya is a testament to the country’s dire need for alternative credit scoring and lending services, in addition to the immense business potential and available capital that exists for companies starting up in the sector.
According to the previously mentioned report by PwC, the most promising fintech opportunity in India is leveraging existing data and analytics. In addition, a gap of roughly $200 billion in credit supply currently exists in the country due to the significantly under-banked and new-to-bank population that characterizes the region.
Much of this gap exists due to the growing need of small and medium-sized enterprises (SMEs) with capital deficits and no access to traditional credit lines. This highlights the importance of startups like CreditVidya in aiding the country’s delicate startup ecosystem by opening the door to credit availability for SMEs.
Sunil Kanoria, President of ASSOCHAM, reiterates this point, writing, “With the banking system clearly constrained in terms of expanding their lending activities, the role of NBFCs becomes even more important now, especially when the government has a strong focus on promoting entrepreneurship so that India can emerge as a country of job creators instead of being one of job seekers.”
With this goal in mind, many entrepreneurs have been taking to the alternative lending sector of fintech to expand financial inclusion and tap into the market’s potential. As of 2017, more than 225 alternative lending companies have been founded in India, up from only 158 in the previous year.
While some companies have established a platform for both alternative credit assessment and lending, CreditVidya focuses solely on assessment. In doing so, it provides other major institutions the analysis they need to make accurate and profitable lending decisions, which will allow it to grow hand-in-hand with other players in the market.
The funding of CreditVidya reaffirms the importance and growth potential of alternative lending in India, as well as its position “at the heart of the Indian FinTech opportunity.”