CredoLab Jumpstarts Financial Inclusion in South Africa Using Smartphone Data
September 30, 2019
Artificial Intelligence: The Gamechanger in Improving Persistency Ratio and Boosting Customer Experience
Alternative credit scoring fintech company, CredoLab, officially launches in the African continent with the signing of three new clients – two banks and a leading airtime credit provider. Starting from South Africa, CredoLab is seeking to drive financial inclusion in emerging economies by credit scoring more people, especially those who are new to bank and new to credit.
CredoLab announced that has to date signed up one of the large banks and one of the new digital banks and it is in negotiations with other large financial institutions, credit bureaus, consumer lenders in South Africa.
Michel Massain, Sales Director for Europe and Africa at CredoLab says, “South Africa is a country desperately in need of ways to help more people access financial products and participate in the economy. It is estimated that about 76% of the Sub-Saharan African population has a need for credit but cannot access it, as they are excluded from the traditional banking sector.
“You need a credit score to participate in the economy. But what about people who are new to credit and new to bank? How do they get a credit score? 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 Massain.
Many people in South Africa remain neglected by the mainstream financial sector and are invisible to lenders because of a lack of data for risk assessment. Existing options for the underbanked are limited, traditional credit scoring is inadequate, and as a result, many turn to informal money lending with excessive interest.
Says Massain, “CredoLab was launched in 2016 in Singapore with the goal of solving one problem: the lack of instruments available to assess the credit worthiness of nearly two billion consumers globally. By harnessing the power AI applied to smartphone data, we enable financial institutions to grow by reaching new segments, that they weren’t able to access through traditional systems, at a lower cost of risk and take real time decisions.” says Massain.
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. All digital scorecards are customised for clients, whose requirements, risk appetite and credit scoring thresholds are unique.
This use of non-traditional data and predictive analytics for credit scoring enables lenders to expand their pool of borrowers while keeping risks under control.
“Millennials, new graduates, self-employed and other thin credit history customers increasingly try to access credit, but to no avail. Here, digital scorecards help provide predictive insights into borrower behaviour, thereby redefining credit-decisioning,” adds Massain.
Commenting their vision for the country, CEO and Co-Founder of CredoLab, Peter Barcak said, “We are excited about our launch into South Africa, which is our gateway to the African continent where too many people remain locked outside of the mainstream economy because they do not have the credit history in the traditional sense to participate in it.” With plans to expand further into other countries of the continent, Peter added, “Our hope is that CredoLab will help to remove a key barrier to entry in South Africa and complement traditional credit scoring systems with the power of behavioural data” he says.
In just three years, CredoLab has mushroomed to become an award-winning business delivering better credit decisions to 51 clients in 14 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.