Startup Street: Think Analytics’ Algo360 Is Using Alternate Data To Get Indians Better Credit Access

This week on Startup Street, we have Think Analytics Algo360 harnessing non-traditional data—the kind they get from your phone, purchases and social media—to make credit more accessible to Indians. The Neotia Group in Kolkata and Microsoft Inc. in Kochi are looking to play a bigger role as startup mentors. And fintech major Razorpay has acquired payroll and human resource management software company Opfin.

Here’s what went on.

Harnessing India’s Alternate Data

If data’s the new oil, Think Analytics’ Algo360 is going big on hydrogen fuel.

The startup is mining alternative data—extracted from users’ phones with their permission through an application—which in turn is used by some of India’s largest lenders to assess a person’s credit behaviour. It covers your mobile data, app data and even social media data which, according to founder Amit Das, leads to lower risks for banks and better access to credit for Indians.

“Our Algo360 risk score can reliably predict the probability of a loan default, and hence, helps lenders make decisions in real-time,” he told BloombergQuint.

That comes at a time when bureau data remains sparse and inaccurate in India, given its diverse geography. Of the adult population only 20-25 percent people have credible or decision-driving information captured in credit bureaus, Das said. The rest find themselves paying higher interest rates, if they get access to credit in the first place.

“My driver could not open a normal savings account. He struggled for weeks before getting rejected by the banks. There’s no possibility of him getting a loan from one of the national banks,” Das said. “But, by understanding the way he recharges his cellphone, or pays electricity bills, or maybe, by understanding the cell phone device he uses, and the fact that his geo-location data suggests extreme geographic stability, one can understand their creditworthiness.”

Founded five years ago, Think Analytics has bagged many high-profile clients. It sources information for three of India’s five largest private banks, and more than 17 other fintech companies and lenders, the founder said, choosing not to name the companies. It also works with 10 international fintech companies and lenders with an India presence.

On the other side, it has access to 1.5-3 million new profile every month on a sustained basis. That compared to more than 2.5-3 billion inquiries serviced by traditional credit bureas every year. “We believe that alternate data inquiries and profiles will surprise bureau penetration in the next 2-3 years, given the expanded reach they provide for businesses looking to expand.” To be sure, while the startup helps mine the data, the data itself is owned by the lenders or the application owners, Das said.

The Alternate Data Blow Up

Alternative data has blown up globally—especially in the financial services space—over the last few years. The number of providers has tripled in three years to 1,126, according to Eagle Alpha Ltd., an alternative data provider that projects global spending will reach $900 million by 2021, nearly double the 2017 level.

To be sure, Think Analytics isn’t the only player in India leveraging alternate data for bankers. All platforms that claim to assess a person’s credit worthiness in real time use this data to some extent. Think of companies like Creditmate, Capital Float, Lendingkart, among others.

Most high quality scorecards, however, are hybrid scorecards combining bureau data, alternate data, third party data, bank statements, etc. “Very few companies have completely bypassed the bureau for decisioning systems,” Das said. “A lot of fintechs use the word AI quit flimsily, especially in the creditworthiness context.”

When asked how many companies in India do what they do, Das said there are more than 50 companies claiming to be doing so, including the fintechs who lend. Companies that are actually doing so, he said, are less than five.

“For the lending industry, we might just be the largest. We have reviewed more than 25 million such customers in the last 12 months itself.”

The Legality Of It

Alternate data is harnessed through collecting all mobile, application, spending and geographical data, usually through one’s phone. But is this legal?

Short answer is yes; long answer—depends on the use-case or scenario, Das said. “It’s subject to them declaring legitimate use cases to the customers and acquiring their consent...The secret lies in ‘relevant use-cases’, ‘prominent disclosure’ and ‘informed consent’,” he said.

Kolkata, Kerala See Increased Startup Mentorship

Neotec Hub, a part of the Ambuja Neotia Group that’s presently supporting around 25 startups, plans to onboard more for mentoring and enabling them to earn revenue, a company official told the newswire PTI.

The hub supports startups in the fields of real estate, healthcare, education, sports, entertainment, fintech, clean technology, hospitality and Internet of Things, the official said.

The hub provides seed funding of Rs 25 lakh to each startup and subsequently, prepares them for receiving more funding from angel investors and venture capitalists.

Neotia claimed Neotec Hub is the only platform floated by a corporate entity in Kolkata for incubating startups. “Our aim is to support the startup ecosystem in Kolkata and the eastern region and provide all required support and mentorship.”

Speaking on the recent success story of the Neotec Hub, he said, “BookingJini, which is a platform empowering hotels to generate direct bookings from their websites, has raised Rs 3 crore seed funding from Mumbai Angels.” Incorporated three years ago, the goal of the hub is to create four success stories by April 2020, he said.

At the same time, in an initiative that would considerably boost Kerala’s startup ecosystem, technology and software giant Microsoft launched a business mentorship programme for nascent firms in the southern state.

Microsoft’s ambitious Highway to a Hundred Unicorns project in India entered Kerala by rolling out day-long guidance and networking sessions to the states promising startups.

Twelve select firms from the state are vying for a national-level round that ensures advanced guidance on developing products, strategies and funds for three finalist startups towards becoming Unicorns—or companies that are valued over $1 billion.

India presently has 26 unicorns and aims to have 100 such entities.

“It’s high time India had its startup ecosystems in cities beyond the metros, and that’s why Microsoft is holding the event at Kochi after rounds in Gujarat and Rajasthan,” speakers said at the inaugural session.

The programme is held in association with Kerala Startup Mission at its premises in Kalamassery, near Kochi.

With inputs from PTI

Razorpay Acquires Opfin, Introduces Corporate Credit Cards With RBL

Fintech major Razorpay acquired payroll and HR management software company, Opfin. The company didn’t reveal the amount at which the acquisition was made.

The acquisition will enable businesses to not only manage their payroll process and fund transfers, but also manage filing of taxes, compliances through a single platform without hiring any external vendors, Razorpay said in a statement.

“Payroll is a fragmented market with no clear solution. With Opfin, Razorpay hopes to make this effort a lot easier with robust technology and an enhanced experience. This acquisition is a significant part of RazorpayX's business banking strategy,” it said. RazorpayX is the company’s artificial intelligence-driven neo-banking platform.

This is Razorpay’s second acquisition in the last six months after Thirdwatch, an AI-driven company specialising in big data and machine learning for real-time fraud prevention. Besides, Razorpay launched corporate credit cards for SMEs and startups in partnership with RBL Bank Ltd.

With this launch, Razorpay aims to solve challenges around access to credit, short term credit, reconciliation, expense filing and help businesses lead a healthy financial life, it said.

These announcements were made at the second edition of FTX, Razorpay's flagship fintech conference in Bengaluru.

Source: PTI