Mumbai: CreditVidya, a financial technology start-up that leverages non-traditional data sources to provide credit scores to individuals, has raised $2 million from venture capital (VC) fund Kalaari Capital, said a top company executive.

The investment will help the company expand its technology and data science team and strengthen its technology platform, said Abhishek Agarwal, co-founder and chief executive at CreditVidya.

The company uses non-traditional data sources such as the mobile phone recharge pattern of an individual, utility bill payments, e-commerce purchase behaviour etc. to provide a credit score for individuals who do not have a traditional credit score, said Agarwal.

“In order to give a credit score, the traditional credit bureaus have to rely on the repayment history of loans and credit cards. But if you have never taken a credit card or a loan earlier, then it’s very hard for a person to get a score and thus difficult to get a loan," added Agarwal.

Currently most banks and other lending institutions rely on credit scores provided by credit bureaus such as CIBIL.

The start-up, founded in 2013, has tied up with several financial institutions such as Bajaj Finserv, Fullerton India and Shriram Housing Finance and gives these lenders the ability to score customers, minimize fraud rates and accelerate verification processes of potential customers.

The start-up plans to score around one million individuals by the end of the current financial year, said Agarwal.

According to co-founder Rajiv Raj, formal credit bureaus cover only 20-22% of the population. “Currently, credit bureaus rely heavily on traditional data streams such as details of repayment of loans and credit cards to generate credit scores. India’s demographic profile consists primarily of people without a credit history," he said.

There are about 350 million customers in the income bracket of Rs.2 lakh to Rs.5 lakh a year whom banks are unable to lend because they are “credit invisible", said Raj, adding that a lot of potential customers that banks target on their digital platforms are young people who might be completely new to credit and thus lacking a formal credit score.

CreditVidya will use the funds to grow its team from the current 37 members to 70 by end of the financial year. The company has already doubled its team strength in the last two months, said Agarwal.

Kalaari’s investment in CreditVidya highlights the VC interest in the fin-tech space, a much-sought-after area lately.

According to a 7 June report by KPMG and IT industry body Nasscom, the Indian fin-tech software market is expected to double from $1.2 billion in 2016 to $2.4 billion in 2020.

In 2015, investors pumped in $1.5 billion in the fin-tech space, the report said. Globally fin-tech investments of $19 billion were recorded last year.

According to Vishal Pereira, managing director at financial advisory firm CreedCap Asia Advisors, the market potential for credit scoring is huge for fin-tech start-ups. “There is a huge market segment, where people have disposable incomes but banks and NBFCs (non-banking financial companies) don’t target them as the existing credit score models are not innovative enough to allow for the same," he said.

However, Pereira added that to build a scalable model, companies will have to look at adding other pieces of lending to their models, such as having their own balance sheet, peer-to-peer lending, and doing distribution and collection, rather than working on only one particular piece.

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