UK-based financial inclusion specialist Accion has inked an investment deal with
Aire, a UK-based credit scoring startup.
Aire uses a proprietary artificial intelligence process to ultimately help banks lend to new, qualified borrowers. During an online interview, the company’s collects and validates applicant-provided data to evaluate profession, education, and financial knowledge.
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.
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 – such as those who are 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.
Varma co-founded the company, along with Mr. Jon Bundy and Dr. Srini Sundaram, in 2014 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.
Prior investments that help banks lend to thin-file customers with confidence include those in startups such as First Access, DemystData, and RevolutionCredit, all of which help people excluded from the financial system to access and benefit from formal financial services.
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to the Consumer Financial Protection Bureau, and an additional 19 million Americans have credit reports that are so outdated that they are practically unscorable.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.
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