CreditVidya's Mantra: Credit At Fair Rates For All

The forward looking Mumbai-based B2B fintech startup uses non-traditional and alternative data to let even new-to-credit Indians be considered for credit without hassle.

Their proposition is new to India but looks sustainable as the company has broken-even after two years of business.

The idea of CreditVidya was born when Rajiv Raj and Abhishek Agarwal met while working at Experian, a US company based in Chennai that is similar to Credit Information Bureau India Limited (CIBIL).

Between the two there is enough expertise to redefine debt markets. Raj specialises in underwriting, has 17 years of experience as a banker and joined CIBIL at its inception. Agarwal worked as a software engineer with Reuters, then worked on Wall Street before coming to India to head sales for Experian in 2010.

CreditVidya aims to help lenders in approving more loans as at present a large percentage of applicants are denied credit due to lack of information.

"Fifty per cent of loan applications rejected are those of new-to-credit customers. Banks aren't approving enough loans of customers who have never applied for loans," said Raj, who serves as CreditVidya director.

The credit market in India is not mature like that of the US, CEO Agarwal added.

"I had a credit card when I was 17," he said.

Raj and Agarwal said agencies like CIBIL do not have any information on first-time loan seekers and this is where analysing alternative data becomes important.

"Underwriting takes too long and it's so subjective. How do you decide by looking at a guy's house that he will pay you back?" Raj said.

The two came up with a data analytics company in 2013 that will assess risk and eligibility of a loan applicant faster and in a more cost-effective way.

CreditVidya uses alternative data in addition to traditional data to assess the risk more accurately.

"We are now working on how to help approve a personal loan for about 2-3 lakhs in a matter of 6 hours which usually takes 2 days," Agarwal said.

Alternative data
Alternative data may mean everything besides traditional data. For example, information like an applicant's email addresses, profiles on Facebook, LinkedIn, Twitter, phone and electricity bills, online shopping and travelling habits can be considered as alternative data in determining a person's credit worthiness.

Looking at alternative data helps lending institutions partnering with CreditVidya to analyse credit worthiness more precisely. The interest rate is still fixed by the lender but having favourabe alternative data may help an applicant in getting a fairer rate.

Two big challenges
Already the startup has partnered with Bajaj Finserve, NBFCs, and other leading lenders across the country. CreditVidya charges each partner at a previously agreed rate per transaction.

But convincing lenders that CreditVidya will add value to their underwriting process has been difficult, according to Agarwal.

The other challenge has been to recruit talent. The problem was greatly alleviated with a $2 million funding from Kalaari Capital. This endorsement of a venture capital firm helped rope in better technical talent crucial to innovation in a fintech.

Competitors
The founders do not mention specific rivals but they do say future competition may come from CIBIL-like institutions, which may potentially use technology to analyse alternative data for credit worthiness.

Both Raj and Agarwal are enthusiastic about CreditVidya's potential.

"Only 6 per cent of India has access to debt as opposed to 91 per cent of the US," Raj said.

There are other potential partners CreditVidya hopes to work with. The company will be running a pilot project with an e-commerce company soon. Working with e-wallets like Paytm and Mobikwik is another avenue for revenue growth.

As more Indians go online, it will mean more information for analytics startups like CreditVidya to leverage with partners.

Raj and Agarwal said once they are well-established in India, the company will look to expand overseas, especially in the Middle East and Southeast Asia.