Since its inception, CredoLab has powered over $2 billion in loans issued by over 70 client lenders
Singapore-based fintech startup CredoLab, which develops bank-grade digital credit scorecards, has raised US$7 million in a Series A funding round led by U.K.-headquartered Identity Data Intelligence firm GBG, the startup announced in a press release on Wednesday.
The current round of financing also saw participation from existing investor Walden International, which had previously invested $1 million in CredoLab in 2018, and Access Venture Capital, among other new investors.
CredoLab will use the fresh funds to consolidate its leadership in Southeast Asia (SEA) and to expand to the U.S. and select countries across Asia, Latin America, and Africa, the statement noted.
Founded in 2016, CredoLab develops banking-grade digital credit scorecards for financial institutions, lenders, ecommerce, ride-hailing companies, ewallets, insurance providers, and retailers. The startup claims to help businesses make better credit decisions and decrease their costs of risk.
CredoLab’s AI-powered credit scoring algorithm CredoScore crunches over 1 million data points from opt-in smartphone metadata to discover predictive delinquent behavioral patterns, producing accurate real-time credit scores, says the startup’s website.
The company statement notes that CredoLab uses consumer-consenting smartphone and web metadata for its digital scorecards. Since its inception, the startup has powered close to $2 billion in loans through 22 million loan applications issued by over 70 clients from more than 20 countries.
CredoLab also asserts that its clients have experienced 20% higher new to bank customer approvals, a 15% reduction in non-performing loans, and a 22% dip in fraud rate as a result of CredoLab’s credit scoring mechanism.
The startup plans to use the fresh capital injection to also enhance its product features and increase its understanding of customers’ digital risk, the statement said.
A 2015 report by the U.S. Consumer Financial Protection Bureau states that 11% of the U.S. population, or 1 in every 10 adult Americans, referred to as ‘credit invisible,’ does not have a credit report. The report adds that another 8.3% of the U.S. population are considered ‘unscorable’ by traditional credit bureaus because of insufficient credit history, and are also referred to as ‘thin-file’ consumers.
According to CredoLab, the startup provides a solution that enables businesses to evaluate and approve customers whose credit-worthiness cannot be easily ascertained, thereby increasing financial inclusion.
The global pandemic has proliferated the struggles of the unbanked and underbanked consumers in the U.S. who face difficulties in accessing basic banking facilities like depositing checks or opening a bank account, the statement notes.
With 8.4 million households in the U.S. being underbanked, CredoLab aims to work with banks and non-bank lenders to increase financial inclusion among U.S. consumers and businesses that are unable to access credit through traditional financial institutions.
In November last year, CredoLab entered into a partnership with U.S.-based iovation, a TransUnion company, to increase financial inclusion among ‘credit invisible’ and ‘unscorable’ consumers.
Integrated with CredoLab’s product suite, Iovation’s fraud detection and prevention solution FraudForce helps reduce fraudulent loan and credit card applications, thereby helping CredoLab efficiently and accurately score financially excluded consumers and democratize credit scoring.
“Despite the obvious slowdown caused by COVID-19, we have already seen a significant shift from physical to digital originations and an increased appetite for using alternative sources of data,” said Peter Barcak, CEO & Founder of CredoLab.
“CredoLab has continued to provide a stable behavioral score that has kept its predictive power even as payment holidays have made it harder for lenders to rely on credit bureau scores. We have become an essential part of the recovery strategies of our clients as they restart lending in the post-COVID-19 environment in a risk-controlled way,” he added.
Chief Executive of GBG Chris Clark said, “GBG’s fraud and compliance solution allows financial institutions to onboard and transact with their customers quickly, safely, and securely. We have experienced first-hand CredoLab’s capabilities from our ongoing commercial partnership.”
“The company’s AI-based proprietary technology will complement our existing offering but also provide critical behavioural risk reference data from good customers that are financially excluded,” he added.
Header image courtesy of iovation