Global Analytics Holdings Inc., a company that uses big data to extend financial services to those who don’t have access to them, has raised $30 million in debt to fuel global expansion and meet capital requirements.
It is also looking to enter India in the next three years, said an executive, making it the first firm to use big data to evaluate creditworthiness in India.
Although headquartered in San Diego, the company’s technical centre is in India where 80% of its 400 employees work. Through its website Zebit that was launched in 2011, the company extends short-term loans with flexible repayment options to the financial excluded.
“While our core competency is in credit-risk assessment and scoring, with Zebit, we use analytics to help arrive at a decision on who to lend to by mining information from employment verification services, social and online behaviour,” said Mukund Venkatesh, vice-president and general manager of India operations.
US-based Crystal Financial Llc funded the $30 million term debt facility with which the company has now raised a total of $95 million in equity and debt financing since 2009. The company said it could not share details on tenure of the debt facility and interest on it.
Zebit, which has revenue of about $100 million, typically lends to small entrepreneurs, and salaried or part-time workers between the ages 25 and 50 with a salary of $40,000 to $50,000 a year. It is both a lender and acts as a platform for financial institutions and online merchants to help them decide who to lend to and is present in the UK and recently entered the US market.
It will, however, have to adopt a different model in India, where it may partner with microfinance institutions (MFIs) to help mine data and analyse who to extend credit to, by using the field force that MFIs rely on. In addition, it is also betting on the Aadhaar project for data on individuals.
“What is key here is, what are the data sources available to make decisions. For a below the pyramid user, there is very little data available at this point, and credit decisions will be hard to make with or without big data,” said Alok Mittal, managing director, Canaan India, a venture capital firm that has invested globally in companies that use big data.
“There is a long-term opportunity here. But in India there is a lot of possibility of people under-reporting and giving bad data. It would take the company at least three years to get the data right, and returns can be expected only in a 7-10 year horizon,” said Mukund Mohan, director, Microsoft Ventures, adding that India is the destination for a company like this as the number of the underbanked is large.
Only about 35% of the 1.2 billion people in India have formal bank accounts, according to a World Bank survey in April. There are 68 million underbanked in the US, 8 million in the UK and 420 million in India.