Repayment of loans is a delicate matter because any delay creates considerable stress for lenders and borrowers. Startup based on Gurugrampromises to streamline debt collection using technology.
Creditas was founded in 2015 by Madan Srinivasan and Anshuman Panwar, who understood the power of analytics and technology in debt collection while working together at a UK based fund house.
The duo, who had a long history in the financial services industry, decided to apply the technology to the debt collection process in India. With this idea, they started their entrepreneurial adventure.
âDebt collection is done by people and it can sometimes become coercive. That’s when we decided to remove that layer and use the digital interface, âco-founder Madan told YourStory.
Creditas has built a technological platform where the whole process of collecting loans from banks or financial institutions, especially credit card bills, personal or auto loans, among others, is done only through a support digital with extremely minimal human intervention.
Pain points in debt collection
Traditional debt collection is fraught with pitfalls. Madan says, âThe classic approach is a one-size-fits-all solution to default, but there is a difference between a borrower who delayed by five days and someone who extended it by 500 days. “
In the experience of the founders, a majority of borrowers have real problems preventing them from repaying the loan.
The second challenge is in terms of communication because no borrower wants to be unnecessarily disturbed about the repayment.
Third, lenders and borrowers need effective resolution.
âOur technology platform takes all the information from multiple sources to make deep segments of borrowers,â says Madan.
Creditas says it sends loan repayment messages to borrowers in a non-intrusive manner where the individual can appear at a resolution committee at their convenience. According to Madan, there are symmetry and friction issues where banks and customers have different issues based on their own information.
Once they show up to the resolution board, borrowers are presented with various options on how they want to repay and it’s all done digitally.
âCustomers love that they’re in control,â says Madan.
Creditas’ technology platform was launched on a website called ClearMyDues where the entire loan collection process was conducted digitally. However, the founders of the startup struggled to convince banks that it was possible because they were more accustomed to traditional methods of debt collection.
In the first three years, Creditas claims to have developed very strong traction thanks to ClearMyDues, where the startup would get a certain portion of the bank accounts requiring debt collection.
âWe started by telling customers that your credit is low, why not come see us and we’ll find a solution,â says Madan.
He further adds that it resonated very well with customers as they weren’t pushing but, in fact, informed them of the problem.
It turned out to be a win-win situation for banks and customers. According to co-founder Anshuman, thanks to their platform, banks have seen their recovery increase by 5% with a cost reduction of 40% while complying with all regulations.
Evolve into a product
This is also the moment when the founders realized they had to evolve the startup into something different.
Creditas decided to white label its technological platform and provide its solution directly to banks where it would be part of their recovery infrastructure. The product, Ethera, is deployed as a SaaS (software as a service) platform.
âWe thought that instead of asking the banks to give us their accounts, why not label our technology in white,â says Madan.
The founders also believe that there is a unique relationship between borrowers and banks. Creditas wanted to be part of the system where it could add more value in terms of the technology platform. This would amount to integrating other ecosystem players such as credit bureaus on the platform to create a plug and play solution.
Ethera’s business model is a mixture of licensing and transaction fees.
âAs a platform, our idea is to scale faster with the addition of new use cases and we also help banks modernize their technology infrastructure,â Madan said.
Anshuman says, âOur platform is very hyper personalized where we have different messages for different segments. There is a lot of gamification in the process, which makes the customer a lot more involved.
The founders of Creditas believe their technology platform brings familiarity, context and convenience to borrowers where banks continue to have smoother relationships with their customers.
Today, Creditas has more than 20 private sector banks and its clients have more than 30 million accounts on its platform. It has a team of around 250 people.
As the technology platform operates on a SaaS model, there is a certain license fee for using their solution and there are certain transaction fees for any successful debt closing.
About five years ago, the seed company raised an undisclosed amount in angel funding. The founders say the startup has been profitable for the past three years.
As part of its future plans, Creditas seeks to tap other customer sub-sectors such as public sector banks and smaller NBFCs (non-bank financial corporations). It also examines new use cases such as housing finance, loans to SMEs (small and medium enterprises), etc.
In addition, it seeks to expand into other markets such as Middle East and South East Asia where there is a similar debt collection environment.
âOur solution is a neo collectible platform and there is a lot of traction for it,â says Madan.