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Kreditech<\/a>, the German startup backed by Peter Thiel, Rakuten and the IFC that\u00a0creates credit ratings and provides finance to people\u00a0who may not otherwise have credit histories, has raised another round of funding from one of its strategic partners. PayU, the payments company owned by Naspers that is known by some as the \u201cPayPal of emerging markets\u201d \u2014 its business is mainly in providing payment services to online merchants \u2014 is investing \u20ac110 million ($120 million) in Kreditech.<\/p>\n The companies are not officially disclosing Kreditech\u2019s valuation, but sources tell TechCrunch that it\u2019s higher than the previous valuation (which we last\u00a0estimated<\/a> was about \u20ac300 million) but\u00a0less than \u20ac500 million. PayU\u2019s investment is mostly in equity, and it gives\u00a0Naspers a minority stake in Kreditech. Kreditech\u00a0to date has raised \u20ac242 million to date<\/a>, including this latest \u20ac110 million injection.<\/p>\n Before this, PayU and Kreditech had already been working together, specifically in Poland, to provide financing options to potential purchasers on sites where PayU was powering payments. As CFO Rene Griemens describes it, services like Kreditech are important in economies where there is little credit card penetration nor existing credit histories, and so therefore limited options for how to pay for items over an extended period when you don\u2019t the money to do so up front.<\/p>\n The service in Poland issued \u20ac10 million in credit to users, and now the\u00a0plan will be to expand this relationship to more markets where PayU operates. The company currently works with over 300,000 merchants in emerging markets in Asia, Central and Eastern Europe, Latin America, the Middle East and Africa, covering a potential footprint of 2.3 billion users.<\/p>\n It\u2019s specifically\u00a0developing\u00a0a stronger\u00a0focus in India, where Naspers \u2014 as part of a larger investment strategy<\/a> in emerging markets \u2014\u00a0acquired CitrusPay<\/a>\u00a0via PayU for $130 million and has made other bets in e-commerce<\/a>.<\/p>\n PayU\u00a0now competes\u00a0against PayTM and others in capitalising\u00a0on a fast-growing\u00a0e-commerce market. Offering more financing options as a part of the payment process is one way to help differentiate PayU\u00a0and make it a more attractive merchant partner. (Notably, Kreditech has recently opened an office in India and is currently hiring to fill it out.)<\/p>\n Giving buyers (whether consumers or businesses)\u00a0an option to take out financing for larger purchases opens up the prospects for buyers to even consider certain purchases, and reduces the likelihood of shopping cart abandonment at the point of sale. Griemens said that offering these kinds of options can double the conversion rate for some merchants in these markets.<\/p>\n \u201cWe are excited to build a leading innovative online consumer lending player in high growth markets,\u201d said Laurent le Moal, CEO of\u00a0PayU, in a statement. \u201cWith our substantial investment we deepen our relationship with the industry-leading management team at Kreditech, and help to bring pioneering machine learning and AI technology to the many high growth markets around the world that need better access to financial services. At PayU we believe in the enormous potential of technology to unlock credit and financial services for underserved populations.\u201d Naspers has made some \u20ac245 million in fintech investments globally via PayU in the last year, he added.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n As we\u2019ve described before, Kreditech\u2019s business is based on a big data play. To make up for the lack of credit history for most of its prospective customers, the company brings together various sources of other data \u2014\u00a0some\u00a020,000 data points in all \u2014 to triangulate and create a financial profile and credit score for the user to assess the risk of providing finance to that person, and setting a corresponding interest rate to that risk.<\/p>\n The more\u00a0cynical might\u00a0see loans to those who are of a lower economic bracket as\u00a0predatory, providing money to people who may not have the means to pay it back, and there have certainly been some companies<\/a> that have contributed to that image. But the\u00a0more optimistic see services like Kreditech\u2019s\u00a0as giving an opportunity to those on the less advantaged side of the digital divide as a leg up and opportunity.<\/p>\n Over time, the theory is the Kreditech\u2019s big data platform\u00a0will continue to get more sophisticated and be able to make better decisions about who is best positioned to receive and pay back finance. Griemens said that the company has been shifting its loans over time.<\/p>\n \u201cWe are currently moving towards lower interest rates, giving up revenues\u00a0in return for better quality customers, focusing less on subprime and more near prime,\u201d he said. The company will be publishing its annual results soon and from what I understand revenues are currently at just under \u20ac50 million.<\/p>\n The company is also looking at ways to introduce some of the same instruments that it is now offering routes to bypass. One of these is credit cards \u2014 which also see low penetration in emerging markets because of the lack of credit profiles for average consumers.<\/p>\n \u201cWe\u00a0are very open to these,\u201d said Griemens. He noted that Kreditech has\u00a0changed its\u00a0business model over time to more of a\u00a0partnership model, \u201clending as a service\u201d delivered via an API, and this would likely be how it moves into card services, too.<\/p>\n \u201cWe have tested credit cards, prepay credit cards, on the basis of our credit scoring and it\u2019s a product that we might come back with in the future. Right now, the focus is to provide direct credit in the shopping basket because\u00a0the customer doesn\u2019t have to go through the route of the credit card\u00a0company can transact\u00a0directly.\u201d<\/p>\n Longer term, this partnership with PayU is one that could lead to a full acquisition. \u201cWe would definitely\u00a0consider acquisitions,\u201d said Griemens. \u201cA\u00a0lot of companies now recognise\u00a0that it may not be as easy as previously thought to make money in the emerging markets financing sector, so we are very open to our options in future. We would certainly\u00a0look at a potential stronger combination\u00a0with PayU\u00a0in one form or another.\u201d<\/p>\n Featured Image: PIUS UTOMI EKPEI \/ Stringer via Getty Images\/Getty Images<\/small><\/p>\n","protected":false},"excerpt":{"rendered":"\n\n\n\n![\"\"](\"https:\/\/tctechcrunch2011.files.wordpress.com\/2017\/02\/gettyimages-80689794.jpg?w=680\")
Kreditech, the German startup backed by Peter Thiel, Rakuten and the IFC that\u00a0creates credit ratings and provides finance to people\u00a0who may not otherwise have credit histories, has raised another round of funding from one of its strategic partners. PayU, the payments company owned by Naspers that is known by some as the “PayPal of emerging markets” — its business is mainly… Read More<\/a><\/p>\n\n<\/img><\/a>
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