Fintech

Brazilian startup Creditas is revolutionizing credit in the world’s third largest lending market

Comment

Image Credits:

After 12 years working for banks and consulting firms on the digital transformation of financial services, Creditas founder Sergio Furio finally found a problem he felt he could build a business around.

Over dinner with his Brazilian wife in their New York apartment one night in 2011, she casually mentioned that consumers in her country were paying more than 200 percent interest rates on consumer loans. The longtime fintech professional basically did a spit-take. After digging a bit deeper into the problems that consumers faced, Furio had his business idea and Creditas was born.

Roughly six years after that fateful dinner, Furio is wrapping up a $50 million venture capital financing round (one of the largest in Latin America’s history) and preparing to radically reshape lending in a country that sorely needs it.

The heart of Furio’s innovation is the notion of a collateralized loan. While the lenders that require collateral to issue a loan in the U.S. are typically catering to low-income customers, Furio views collateral as one of the only ways to lower interest rates for would-be borrowers in Brazil.

So far, the company has originated about $100 million in collateralized loans. Furio’s company charges anywhere from 17 percent to 25 percent for home equity loans and between 23 percent and 50 percent for auto equity loans, according to Furio.

Creditas actually makes money in three ways: through loan origination fees; through servicing fees; and return on investment for the junior tranches in the funds that supply the loans.

There’s an acute need for services like Creditas in Brazil. Banks in the country don’t typically offer loans with collateral, because they prefer the high-margin unsecured loans that they’re used to. A typical personal loan has 120 percent APR, and revolving credit cards in the country typically have 480 percent APR.

So far, less than 1 percent of the loans that Furio’s Creditas has issued have resulted in default. According to internal projections, that default rate may go up next year… to 2 percent.

For Brazilians, the benefits of collateralizing the loans are obvious, says Furio. The company sees lower default rates because the consumer has aligned incentives. Then, even if customers do default, losses aren’t as great, because there’s still the underlying asset that covers part of the risk of the loan. Finally, these loans are typically a bigger size that have a lower rate of return and high maturity, so it reduces installment pressure, according to a company spokesman.

According to company estimates, about 75 percent of the 55 million households in Brazil include families that own their own homes. These families have mortgage penetration rates of about 30 percent. That means there are approximately 30 million households with 100 percent equity in their residence. It’s that roughly 100 million people will be affected. Meanwhile, only 25 percent — roughly 37 million cars — have little or no car insurance.

That’s the opportunity that attracted investors like lead investor Vostok Emerging Finance (VEF), the publicly traded investment firm focused on early and growth-stage fintech companies. Previous investors, including Kaszek Ventures, Quona Capital, QED Investors, International Finance Corporation and Naspers Fintech also participated in the investment.

Creditas currently has 285 employees, up from 110 at the beginning of the year, and Furio said the new money will continue to expand the company’s labor force and work on its relationship with regulators.

“We operate through a banking-partner model, we book the loan in a traditional bank and then sell that loan to an investment fund that is the vehicle that is funded by institutional investors and ourselves. This model is 100 percent compliant with regulation, although it generates a dependency,” said Furio. “Central Bank in Brazil has been an ally and is creating a new regulation that will allow us to get our own license to issue the loans directly. This has already finished the public consultation phase and we expect it to be effective in Q1-2018.,” Furio said.

More TechCrunch

“When I heard the released demo, I was shocked, angered and in disbelief that Mr. Altman would pursue a voice that sounded so eerily similar to mine.”

Scarlett Johansson says that OpenAI approached her to use her voice

The European venture capital firm raised its fourth fund as fund as climate tech “comes of age.”

ETF Partners raises €284M for climate startups that will be effective quickly — not 20 years down the road

Copilot, Microsoft’s brand of generative AI, will soon be far more deeply integrated into the Windows 11 experience.

Microsoft wants to make Windows an AI operating system, launches Copilot+ PCs

Hello and welcome back to TechCrunch Space. For those who haven’t heard, the first crewed launch of Boeing’s Starliner capsule has been pushed back yet again to no earlier than…

TechCrunch Space: Star(side)liner

When I attended Automate in Chicago a few weeks back, multiple people thanked me for TechCrunch’s semi-regular robotics job report. It’s always edifying to get that feedback in person. While…

These 81 robotics companies are hiring

The top vehicle safety regulator in the U.S. has launched a formal probe into an April crash involving the all-electric VinFast VF8 SUV that claimed the lives of a family…

VinFast crash that killed family of four now under federal investigation

When putting a video portal in a public park in the middle of New York City, some inappropriate behavior will likely occur. The Portal, the vision of Lithuanian artist and…

NYC-Dublin real-time video portal reopens with some fixes to prevent inappropriate behavior

Longtime New York-based seed investor, Contour Venture Partners, is making progress on its latest flagship fund after lowering its target. The firm closed on $42 million, raised from 64 backers,…

Contour Venture Partners, an early investor in Datadog and Movable Ink, lowers the target for its fifth fund

Meta’s Oversight Board has now extended its scope to include the company’s newest platform, Instagram Threads, and has begun hearing cases from Threads.

Meta’s Oversight Board takes its first Threads case

The company says it’s refocusing and prioritizing fewer initiatives that will have the biggest impact on customers and add value to the business.

SeekOut, a recruiting startup last valued at $1.2 billion, lays off 30% of its workforce

The U.K.’s self-proclaimed “world-leading” regulations for self-driving cars are now official, after the Automated Vehicles (AV) Act received royal assent — the final rubber stamp any legislation must go through…

UK’s autonomous vehicle legislation becomes law, paving the way for first driverless cars by 2026

ChatGPT, OpenAI’s text-generating AI chatbot, has taken the world by storm. What started as a tool to hyper-charge productivity through writing essays and code with short text prompts has evolved…

ChatGPT: Everything you need to know about the AI-powered chatbot

SoLo Funds CEO Travis Holoway: “Regulators seem driven by press releases when they should be motivated by true consumer protection and empowering equitable solutions.”

Fintech lender SoLo Funds is being sued again by the government over its lending practices

Hard tech startups generate a lot of buzz, but there’s a growing cohort of companies building digital tools squarely focused on making hard tech development faster, more efficient and —…

Rollup wants to be the hardware engineer’s workhorse

TechCrunch Disrupt 2024 is not just about groundbreaking innovations, insightful panels, and visionary speakers — it’s also about listening to YOU, the audience, and what you feel is top of…

Disrupt Audience Choice vote closes Friday

Google says the new SDK would help Google expand on its core mission of connecting the right audience to the right content at the right time.

Google is launching a new Android feature to drive users back into their installed apps

Jolla has taken the official wraps off the first version of its personal server-based AI assistant in the making. The reborn startup is building a privacy-focused AI device — aka…

Jolla debuts privacy-focused AI hardware

The ChatGPT mobile app’s net revenue first jumped 22% on the day of the GPT-4o launch and continued to grow in the following days.

ChatGPT’s mobile app revenue saw its biggest spike yet following GPT-4o launch

Dating app maker Bumble has acquired Geneva, an online platform built around forming real-world groups and clubs. The company said that the deal is designed to help it expand its…

Bumble buys community building app Geneva to expand further into friendships

CyberArk — one of the army of larger security companies founded out of Israel — is acquiring Venafi, a specialist in machine identity, for $1.54 billion. 

CyberArk snaps up Venafi for $1.54B to ramp up in machine-to-machine security

Founder-market fit is one of the most crucial factors in a startup’s success, and operators (someone involved in the day-to-day operations of a startup) turned founders have an almost unfair advantage…

OpenseedVC, which backs operators in Africa and Europe starting their companies, reaches first close of $10M fund

A Singapore High Court has effectively approved Pine Labs’ request to shift its operations to India.

Pine Labs gets Singapore court approval to shift base to India

The AI Safety Institute, a U.K. body that aims to assess and address risks in AI platforms, has said it will open a second location in San Francisco. 

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

1 day ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back