3 Notable VC Rounds in Alternative Credit
Fintech funding this year has been on the rise. In the second quarter alone, funding for financial technology companies around the world reached $20.3 billion in nearly 400 deals. Right now, venture capital firms, banks, and investors are pouring funds into companies Artifical Intelligence, the clear flavor of the year.
But AI means more than chatbots and budgeting tools. In fact, alternative lending and more specifically alternative credit scoring are seeing growth thanks to AI and machine learning. This month, especially, there was significant activity from investors in point-of-sale and credit cards companies, not just in the U.S., but also in Asia. Here are three funding rounds in that area that caught our attention on Bank Innovation.
ZestMoney:
Starting off the week right, India-based POS digital lender ZestMoney today announced it raised an additional $13.4 million (Rs 93.6 crores) as an extension to a previous Series A funding earlier this year, bringing the company’s total to over $22 million.
Today’s round was led by China-based mobile phone maker Xiaomi and includes payments company PayU and investment firms Ribbit Capital and Omidyar Network. The original Series A, which amounted to $6.5 million, was led by PayU back in February.
Founded in 2004, ZestMoney uses completely digitalized equated monthly installments (EMI), which allows users to make payments completely online without having to use a physical credit card. To create the financial profile of a user, ZestMoney uses data gathered from credit information bureaus, to determine the exact loan amount. ZestMoney will use the funds from this round to work on a joint product with Xiaomi, which it calls MI Finance – POS loan specifically for Xiaomi products, as well as expand into other markets.
In a statement released this morning, Lizzie Chapman, co-founder and chief executive at ZestMoney, said:
They [Xiaomi] have built one of the most loved brands in India and they have a passionately consumer-focused philosophy which deeply resonated with our values as a company.
The latest funds will be used to build on its technology stack as well as expand in new markets across Asia.
ZestMoney is a point of sale lender that lets consumers apply for loans on the spot, and then repay installments. The company has partnerships with e-commerce companies like Amazon and Flipkart, among others.
Student-focused credit card Deserve last week raised $17 million in a Series C funding round. Along with news of funding, Deserve also launched its mobile app on iOS and Android last week.
Based in Silicon Valley, Deserve uses machine learning and alternative data to create a financial profile for students, who typically do not have high FICO scores or, in some cases, no scores at all.
Investors in this round include past ones such as Accel, Aspect Ventures, Pelion Ventures, Mission Holdings, Alumni Venture Group and GDP Venture. In a statement, Kalpesh Kapadia, CEO, and founder of Deserve said:
We have spent the last few years building a modern cloud-first infrastructure powered by machine learning to originate, process, and service credit cards, providing Gen Z with the means to achieve financial independence. This strategic investment is clear validation in our vision becoming a reality at scale.
Launched last year, Mastercard is the card issuer for Deserve and Utah-chartered Industrial Bank is its bank partner. Thanks to this round of funding, the company’s total raise amounts to almost $30 million to date.
Card provider Visa led the $55 million Series C round of Japan-based POS credit provider Paidy last Friday, bringing the company’s total to more $80 million since its founding in 2008.
Paidy is a POS lender that allows users to apply for credit on the spot. It currently has 1.5 million users and will use the funds to expand into new markets within Japan.
Chris Clark, regional president of Asia Pacific at Visa, stated:
We have been following Paidy’s progress and the enhanced shopping experience they provide at the time of purchase. In Japan there is enormous opportunity to bring consumers more options to pay, whether all at once or in instalments, especially when shopping across multiple channels. We look forward to this partnership to deliver these kinds of new experiences.
To apply for a Paidy account, users only need their phone numbers and email address. Like ZestMoney, consumers can pay their bills in installments, but also have the option of paying the full amount within a month of the purchase.
Paidy said it will use these latest funds to garner more customers in the expanding Japanese e-commerce market, which, according to one report has already grown 9% in the last year.
