Aire, a UK-based credit scoring startup, just secured an investment by the financial inclusion pioneer Accion to help more creditworthy households responsibly access credit.
Aire gives people a new credit score to help them qualify for essential financial products. Formed by a collective of finance, technology, and commercial specialists, Aire is redefining how the market approaches credit scoring using only clean data and ethical means. By harnessing industry expertise, machine learning and an in-depth understanding of the issues facing many consumers, Aire has created a service that allows businesses to access a new, financially-capable population.
The startup was launched in 2014 in London and is backed by White Star Capital, SparkLabs Global Ventures and Techstars. Accion made the investment through its Venture Lab – a $10 million initiative dedicated to providing seed capital and management support to innovative startups that expand financial access to the poor and underserved.
“Around the world, millions of people cannot access the credit that they need to launch businesses, buy homes, or build better lives,” said Accion CEO and President Michael Schlein. “In many cases, this isn’t because they have bad credit history, but rather because they have no credit history. By providing an alternative to traditional credit scoring, Aire helps to extend financial services to more people who need them.”
Credit invisibility is a problem in both developed and emerging markets. In the United States, 1 in 10 Americans has no credit history, according to the Consumer Financial Protection Bureau, and an additional 19 million Americans have credit reports that are so outdated that they are practically unscorable. Aire estimates that that there are 17 million such consumers in the UK and significantly larger proportions in emerging markets.
Potentially creditworthy borrowers are often denied loans or credit cards because they lack the traditional credit profiles that lenders rely on to evaluate applicants. These “thin-file,” but still creditworthy, customers can include:
- those entering the world of formal finance;
- legal migrants whose credit histories do not transfer between countries;
- people with limited sources to build up credit history, for example self-employed, and young adults applying for credit for the first time.
Aire hopes to address this problem by enabling fairer access to credit for consumers around the world. When applicants lack sufficient credit history, they are referred to an Aire online interview, which evaluates a consumer’s creditworthiness to create an “Aire Score.” Lenders can use this score to evaluate applicants and provide them with credit.
Aire co-founder and CEO Aneesh Varma co-founded the company, along with Mr. Jon Bundy and Dr. Srini Sundaram after Varma personally experienced the hardship of being a “thin-file” customer. Despite having a strong financial history in the United States, Varma struggled to be approved for a credit card because of a lack of credit history in the UK.