Airfox’s banQi expects to also leverage the model to develop personal loan products via the banQi digital banking app, with services ranging from debt consolidation to paying off high-ticket expenses for education, healthcare, funding small business, and more. “Accessibility to capital has not kept up with the digitization of life, especially in emerging markets,” said Justin Hoffmann, executive vice president, Airfox. “This is a landmark milestone for both Via Varejo and its customers, as the company will now be equipped with a next-generation, automated machine learning platform for credit risk analysis that incorporates alternative data sources in hopes to increase accessibility to credit for millions nationwide.”
Innovating for financial inclusion
With current credit concentrated and weighted with exceptionally high rates, financial service cost for Brazilian consumers and small businesses is one of the highest in the world. According to The Wall Street Journal, five banks control 82% of the country’s consumer credit and “many Brazilians don’t have a credit history that lenders can access to gauge individual risk and lower rates to clients with higher scores.” As the eighth-largest economy in the world, Brazil’s potential is enormous, but there’s also an enormous service gap. An innovative process that is more inclusive and supplies greater access to credit will foster growth and bridge that gap.
Like the rest of the modern world, Brazilians rely on credit and installment payments for a variety of transactions: “Over 60% of e-commerce is paid for in installments, and 64% of Brazilians cannot afford to make purchases without spreading the payments over several months.” However, in 2018, annual consumer interest rates for credit cards reached 270% for unpaid balances. Such crippling interest inordinately impacts disposable income percentages and discourages financial service consumption amongst an enormous population of lower and middle income consumers. Establishing a more accessible system of credit based on larger pools of data, dynamic risk models, and reasonable rates is necessary.
This ZestFinance partnership will catalyze banQi and Via Varejo in leapfrogging current credit model system with more relevant data integrated into more advanced consumer lending technology built for inclusion and service expansion.
“The digitization of processes and payment options creates entirely new avenues for innovation in how we serve our customers,” said Felipe Negrao, executive director, Via Varejo. “More data and better analysis can ensure more accurate loan decisions. The ZestFinance approach to innovation through machine learning is exactly what we’ve been looking for, and will put us in a more competitive position.”
Leveraging tech for better financial services
With the partnership of both ZestFinance and Via Varejo, Airfox’s banQi is positioned to combine new credit risk technology, a variety of alternative data sources, and immense data and distribution synergies to safely bring credit to millions of Brazilians. According to Goldman Sachs, banking services, payments, lending, and insurance represents US$15.9 billion (BRL$60 billion) in estimated annual revenue potential in 10 years for emerging fintechs.
Building its digital challenger bank on the principles of financial inclusion and mechanisms for establishing digital trust, Airfox recently secured three additional major partnerships — Mastercard, Cielo, and Zurich Insurance — that expand on its existing partnership with Brazil retail giant Via Varejo. The new Airfox contracts exceed US$77 million (BRL$300 million).
“We’ve proven that machine learning works in all types of credit and in every geography,” said Douglas Merrill, chief executive officer, ZestFinance. “Our engineering team looks forward to applying our machine learning expertise to the Airfox and Via Varejo retail rollout and helping millions of their customers to reduce credit rates.”
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