In the modern, credit-rating-dominated world having little or no credit history — what the financial services industry calls a “thin file” — makes life much, much harder. It creates a vicious cycle, where lenders are less likely to lend to a borrower, because there’s no credit history.
Now DemystData has raised $5 million in financing to solve the problem for financial services firms.
DemystData founder Mark Hookey knew the hassles associated with a thin file all too well, which is why he launched his company in Hong Kong in 2010.
“The genesis of [the company] was around getting rejected for credit cards quite frequently when I moved to different places in the world,” says Hookey, a former employee at LexisNexis. “I was rejected for a credit card at one point when I had 20 times the amount of credit and I thought if there’s supposedly this abundance of data out there how come it is not making its way into the hands of the credit provider?”
So Hookey started developing DemystData. The company sells software that makes it easier to integrate fragmented data sources, Hookey says. “Our software brings together a single, cohesive profile of an individual or small business and then we supply that to our clients.” Simply put, DemystData — named for its ability to demystify the reams of data available to financial services firms — integrates social, telecommunications information, and corporate data to create the risk profile associated with an individual or small business.
The promise of the technology was convincing enough to bring in SingTel Innov8, Notion Capital, P2P Equity Partners, and Errol Damelin, the founder of UK-based payday lending service Wonga, as new investors in the company’s Series A round. Previous investor Arbor Ventures also participated in the financing.
While Hookey wouldn’t disclose specific customers, an announcement listed online, peer-to-peer, automotive, and working capital lenders from the U.S. and UK among the industries using DemystData’s software, along with large banks from across the Asia Pacific region.
For Asian banks, DemystData represents the best way to get a better sense of the risk associated with lending to consumers and small businesses, according to Arbor Ventures founder and managing partner Melissa Guzy. “The fact that there are no established credit bureaus in Asia outside of Japan and Australia means the market opportunity is huge,” Guzy says. “Alternative ways of evaluating credit and providing identity verification and what an applicant’s job is and how much they make is really obvious now.”
Guzy sees the software as a service business as a tremendous opportunity to unlock credit markets for consumers and businesses in the developing world. “If you can have a unique identifier that someone can use as their cross-border credit rating, then that’s an enormous market,” Guzy says. “It’s a market that’s completely untapped in Asia and in lots of emerging markets.”