INSUBCONTINENT EXCLUSIVE:
Cash advances (or simply, loans) continue to be a lucrative area for startups to tackle
By leveraging new AI-based tools to evaluate potential customers, the network effect of the internet and the quick efficiency of digital
money transfer, they’re taking on incumbent banks to disrupt a consumer lending market estimated to be worth some $284 billion in
2018 and around $300 billion this year.Today, one of the earlier players in the space that specifically targets emerging economies is
announcing a round of funding to expand its business: Kreditech, the Hamburg, Germany-based provider of loans and point-of-sale financing to
near-prime borrowers in countries that include Poland, Spain, Russia and India, has picked up €20 million ($22 million).The funding is
being led by Russian VC Runa Capital, with participation also from an unnamed German private investor, and previous investors HPE Growth
and Amadeus Capital Partners, along with unnamed fintech angels
Valuation is not being disclosed, but as a point of reference Kreditech was valued at around €500 million in its last fundraise
Other investors in the company include Peter Thiel, Rakuten and the IFC.This is an equity round that it will be using to continue building
its business specifically in the latter of those four countries — doubling down on the fact that India is not only one of the world’s
biggest economies, but one of the fastest-growing, too
It’s also a country where Kreditech has been working to build its business for years at this point: its last big funding round before this
was in 2017, when Naspers’ PayU invested €110 million in the company as part of a strategic partnership to offer Kreditech financing in
India.Kreditech was founded originally around the idea of using AI to make better assessments of potential borrowers in developing economies
(and manage the underwriting using that data and automation), the idea being to target those who have little or no credit history behind
The company started to shift this strategy in 2017 to concentrate instead on “near prime” borrowers — those who may have a credit
history, but not a particularly good one.It’s a strategy it has continued to pursue under newish CEO David Chan (he joined in 2018 as part
of a larger management overhaul and comes with a pretty impressive background with executive roles at Barclay’s consumer division,
Citigroup and American Express)
The company now projects that it will be clearing €1 billion in revenues by 2025 (so, roughly in the next five years) following this
It will only be disclosing its current turnover and other financials next month.Today’s funding round is not the biggest you will see in
fintech, a capital-intensive business that regularly sees rounds in the hundreds of millions (or even in the multiple billions of dollars)
to help startups in their expansion efforts
But it also comes after a relatively cool period for fintech funding, where the very biggest acquisitions — such as Alibaba
yesterday reupping its stake in Ant Financial by 33 percentage points — have been closures of deals that actually first materialised a
year ago.With that backdrop, the company has been somewhat under the radar in the last couple of years, but appears now to be lifting its
head again above the parapet.“We are on track to realize our vision, which is to be one of the leading technology-enabled consumer-lending
companies; a fintech platform of choice for both individuals and POS and e-commerce partners
With a new strategy in place, a solid capital base and our highly motivated and experienced team, we are perfectly positioned to achieve
our goals”, says David Chan, Kreditech CEO, in a statement.“I am really excited about our growth plans in India,” he continued
“We hold a first-of-its-kind digital NBFC (non-banking financial company) license in a large and fast-growing market
We have been successful in finding our niche and have established the right proof of concept
Now it’s time to scale up while a key target customer segment remains unaddressed by the competition.”Runa’s involvement is a sign
that we will see Kreditech also active in Russia and other Eastern European markets, is my guess.“We are excited to be partnering with
Kreditech as it continues on its path to becoming a global leader in digital near-prime lending
We believe that access to credit will continue to be improved through innovation and we see Kreditech as the emerging leader in this space,
especially considering its presence in multiple fast-growing markets around the world,” said Andre Bliznyuk, General Partner at Runa
Capital, in a statement.“We are keen to support Kreditech,” Tim van Delden, co-founder of HPE Growth, added in a statement
“We have great trust in the new management team that Kreditech put in place in 2018
Kreditech’s track record over the last eighteen months, together with its business focus, strategy refinement and path to profitability
has been truly impressive
For these reasons, HPE is convinced that Kreditech has the right management team to scale the business into the near-prime market
Kreditech’s core pillars of success remain the same – it is a technology and data-driven company that is able to use machine learning
scoring models to make credit decisions in real time and with greater accuracy.”
