Kreditech Nabs $92M To Build Financial Services For The ‘Underbanked’

Another startup out of Europe focused on finance has raised a hefty round of funding. Kreditech, a German company building a suite of credit and banking products for consumers who have little or no credit history, has raised €82.5 million ($92 million) to continue adding more products and geographies to its platform.

Confirming what we reported when we first broke news of the round in July, investor and PayPal co-founder Peter Thiel is investing in this Series C round, alongside Amadeus Capital Partners and existing investors Värde Partners, HPE Growth Capital and Blumberg Capital. The round was led by U.S.-based private equity firm J.C. Flowers.

Speaking to TechCrunch about the news, Kreditech CFO Rene Griemens declined to comment about the company’s valuation except to note that it has “more than doubled” from the last round, when it raised $40 million. That round, according to Kreditech itself, valued the company at $190 million, although Griemens points out with currency fluctuations and inflation, it’s inaccurate to simply double that number.

He also added that the round is not completely closed and so there may be more from another financial investor coming. (In our original report, Kreditech was in the process of raising $100 million, and we have now confirmed that this, or slightly above it, is still the final number the company is targeting.)

The company remains unprofitable, and while it is not disclosing revenue numbers, Griemens says operating losses were halved in the first half of the year compared to the same period in 2014. Revenues are also growing at a treble rate, he added.

Kreditech today does most of its business in Poland, Spain, the Czech Republic, Mexico and Russia, using its platform to pitch not to users who might have other access to credit and banking facilities, but those who lack the credit history to borrow money through other means.

Kreditech gets around this conundrum with technology: The company has developed algorithms that weigh up some 20,000 different data points to assess an application. Greimens says that 2 million people have been scored, and the company has extended 500,000 loans to date.

Focusing on demographics that have traditionally been considered risky, the company has seen some controversy, too. Some German news outlets reported over the summer that the company’s growth was stalling and that it was having trouble raising its Series C. There is also the association of loaning money to people who may not be in a position to pay it back, a conundrum that shaped and ultimately disgraced another European fintech startup, the payday loans company Wonga.

“A lot of the noise around the company was due to the uncertainty of closing the round, and the long time we took to find a new investor,” Griemens says. “In May we closed part of it and that helped us to take more time for main part of the round,” he added, referring to Thiel and Amadeus investing earlier than the rest of the group.

He adds that the nature of Kreditech’s business may also play a role, and believes what Kreditech does is not the same as Wonga. “I think that what many people in developed countries don’t understand is that you can’t do financial inclusion for the underbanked at the same APR as you have in a developed country. We are improving conditions for people, people who have had no access to proper financing before.” He says typical APRs are around 30 percent, similar to credit cards in those same regions.

Going forward, the plan is to launch in Brazil sometime in the next year, and to continue expanding the products Kreditech offers. Currently, there are several brands that the company uses with consumers — Kreditech is just the overall company’s name — and Griemens says the different products will over time be consolidated under one brand, Monedo. It’s also growing average loan sizes, which are currently between €800 and €1,500, versus the microloands of €200-€400 that were its initial mainstay.

“There are people without access to fair and affordable credit in every market we have analyzed, and technology is enabling new and better ways of offering credit to these customers,” said Loren Felsman of J.C. Flowers in a statement. “Kreditech has developed a remarkably sophisticated approach to real-time consumer banking, and focuses on markets that are relatively less well-served by traditional credit bureaus and financial services providers.  Most lenders, including those built on modern technology, may not crack these markets for years.” Felsman is also joining the startup’s board.

Other notable fintech startups out of Europe raising money include WorldRemitTransferWise and Funding Circle.