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“We plan to make borrowing money online as simple as clicking one click,” says Matiss Ansviesulis, Co-founder and CEO of Creamfinance. To learn more about the concept of one click loans provider and use of smart data read more in the following interview with Matiss.
What is Creamfinance?
Creamfinance is an online consumer finance company, which was founded at the beginning of 2012. The mission of the company is to make money available; this is done by providing consumer loans online in a convenient and speedy manner.
Creamfinance puts emphasis on using the most advanced and unique behavioural pattern recognition tools by focusing on relevant, value-adding data, otherwise also referred to as thesmart data approach. Proven by a track record from many consecutive years of practice, this is the most accurate way of measuring whether it’s appropriate to lend.
Keeping in mind the ever-growing consumers’ demand for service speed and convenience, we plan to make borrowing money online as simple as clicking one click, hence we aim to become the first one click loans’ provider to consumers globally.
What is your experience in the industry? How many countries does Creamfinance work in?
Our national platforms are operated by an international team, consisting of over 200 employees from 9 countries, currently operating across six markets – Latvia, Poland, Czech Republic, Slovakia, Austria and Georgia. The company has been operating for nearly four years since the beginning of 2012.
I believe the interest for the industry, for me, was influenced by my previous jobs, where I was working as an investment and business analyst in J.P. Morgan, an American multinational banking and financial services holding company. That experience was definitely useful when starting up.
Who is your typical borrower? And how many clients have you served so far? What is your credit portfolio?
The typical borrower is a 25-40 year old employed individual with an average income who uses the service to cover ordinary living expenses and/or unexpected emergencies. On average, customers take a loan worth €200 with the term of 28 days. Up to this point, we have already served nearly 200,000 customers across the markets we operate in.
What is the underwriting procedure? What factors do you take into consideration?
When it comes to a lending decision, it is crucial to work with the necessary value-adding data. In reality, a lot of data comprises of ‘noise information’ having low or no value for the company at all. Our objective is to focus on smart data to filter out the noise and work with valuable data that can be effectively used to make the lending decision.
We have observed that models with lower number of variables result in higher stability, plus it is much less of a burden for the customer, during registration to provide less information, which initially yields a significantly higher conversion rate.
To make a lending decision, we start with fraud elimination and profile audit to build the scorecard that sorts our clients based on credibility. We understand that behaviour patterns differ across demographics and regions and our models adjust accordingly, which is the reason why we work with unique behavioural pattern recognition tools. Keeping this information in mind, profile audit is performed using country-specific factors which lead to a lending decision that initially is an automated process.
What is the repayment discipline?
Historical data shows that approximately 15-20% of the clients delay their payment. We activate our collection procedures and during the first 60 days of delay we recover up to 40% of the delayed amounts. After 60 days delay we continue working with clients and during next year recover up to 50% of the outstanding debt. This gives an effective loss amount of 20%*60%*50%=6%. The exact amounts may differ depending on the market.
Why did you decide to introduce the Buyback Guarantee?
We decided to introduce the Buyback Guarantee due to two main reasons: to increase predictability of cash flows for investors and to raise investor confidence in the new product. Cash recovery cycle for defaulted loans, on which we provide the Buyback Guarantee, can take up to 2 years. We did not want investors to freeze their cash for such a long period of time in order to make the investment offer very attractive.
What benefits do you see in partnering with the Mintos platform?
The attraction of additional funding, diversification of loan funding sources as well as using and sharing the brand name of Creamfinance even more. We shall also work to meet the demand of technological development which is demanded by both borrowers and investors.
Currently on the Mintos platform you have listed loans issued in Georgia. Do you plan to add other countries as well?
Yes, we are exploring the legal frameworks in other countries where Creamfinance operates to verify whether such a business model could work.
Please share the latest financial results. What are your development plans?
Our business in Georgia operates with a high growth. In 2015, a 9 month revenue equaled €3.2 million, compared to the whole year 2014 revenue of €0.7 million. Georgian business is expected to double next year.
Creamfinance group consolidated lending run rate exceeds €60 million. The group’s gross loan portfolio as of the end of September 2015 equalled €23.5 million. 2015 will be profitable for Creamfinance despite more than 100% growth from the previous year. Company will continue its expansion in existing markets and the company is expected to double in size and still stay profitable.
What future do you see for alternative finance industry players?
In 2014, investment in Fintech companies grew by 201%, compared to 63% growth in overall venture capital investments. Simply by looking at these numbers it is obvious that digital Fintech revolution is already here and there is no doubt that it will reshape personal finance and the way we look at it. The new technology-enabled Fintech entrants are not afraid to experiment with technology and are able to provide better risk assessment, more diverse credit landscape and are able match ever-changing customer expectations, which initially translates into a better, faster service, maximized risk management and satisfied customers.