Focusing on 2 billion adults worldwide that are underbanked in financial services – Interview with Kreditech CEO Alexander Graubner-Müller

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I recently had the chance to interview Alexander Graubner-Müller, Co-Founder and CEO of Kreditech at the NOAH London Conference. Founded in 2012, Kreditech is one of Germany’s most successful fintech startups. The young company is on a mission to provide financial freedom to the next 2 billion (currently unbanked) customers through technology. After closing additional €10 million in funding by the end of last year, this year Kreditech announced a big partnership with PAYU, in order to bring credit to the e-commerce space.

Below you’ll find a summary of my interview:

Alexander, what is Kreditech’s mission?

There are a lot of people and markets where the credit history infrastructure is insufficient and banks are very conservative, creating a large underbanked market, which we serve with personal loans.

We are both a direct lender and also offer lending-as-a-service (“laas”). 90% of our business is still direct lending but we expect laas to grow.

Can people who don’t have any bank accounts get financing on Kreditech?

Yes. Banks look for earnings data and credit scores to lend. We, on the other hand, look at an expanded data set that includes micro-geographic data such as purchasing powers, rent. When we enter a new market, we work with the institutions to get access to these data points, such as courts and public records. 80% of data can be founded globally and 20% of data have to be procured and analyzed locally.

In Russia and Mexico, people can get loans with wallet. We can also payout in cash.

How about credit risk?

We always manage our credit risk. We sell part of our portfolio to institutional investor but always keep a portion on our books, we keep skin in the game.

Where do you operate and how will that evolve? And tell us how the new Naspers Group – PAYU fits into this?

We are currently in 4 markets, Mexico, Spain, Poland and Russia. We are in the process of launching India. We have received investment from Naspers Group – PAYU, which has a very strong emerging markets footprint and the synergy is that we will expand where they are strong, such as South America, Romania, Turkey.

Naspers – PAYU made the biggest fintech investment in Germany by investing in us, which we are very proud of. We see a big opportunity to bring “credit to point of sale”. Klarna and Payforcredit are addressing this massive market in USA and developed countries, but we also see a huge underserved market for this in emerging markets and we will go after this.

Consumers buy the same iphones across the world, but the same phone is a much more expensive purchase in developing countries because of lower purchasing power and hence the need and market for credit.

We have been building a point of sale product for e-commerce and will promote it, starting with India. India has been dificult for consumer market. India is also very interesting as it is the market where the major global players all are active, Tencent, Alibaba and Amazon are all in te market.

What do you think on increasing interest rates?

It may increase our cost of capital – however, in the markets we operate, interest level are at higher levels already, so we will probably feel the impact less.

What is the next big milestone you’re looking to achieve with Kreditech?

Our next major milestone is to launch in India. Our vision is to make credit as easy to use, such as the one click loan that can offer a loan within 60 seconds.

What are your thoughts for exit, given you have a very large strategic investor on your cap table now?

NASPERS is now our largest investor but still a minority investor. We are focused to work with them to capture the big market opportunity. We also have other great investors such as IFC and Rakuten. We will see how exits evolve.