Analysis Featured

FICO For Microcredit Lending

Scorista

Established in Russia in 2014, Scorista was born out of the need for a reliable risk-scoring model for Russian lenders. Leveraging the skills of famed Russian programmers, Scorista has created the go-to risk management solution for lenders operating in the sub-prime short-term lending segment.

How Scorista Began

Maria Veikhman, a business management, IT, and risk management specialist is the founder and CEO of Scorista. It took off when a few lenders in Russia realized the dearth of reliable risk managers in the market and asked Veikhman to create a risk-scoring model for their lending businesses. Scorista was born as a disruptive innovation to automate the area of credit assessment and provide clients with an instant credit decision. They believe they can help lenders achieve the desired KPIs in a very short span of time with a guarantee of results.

What gave impetus to the company was the dearth of risk management solutions for short-term lenders and payday lenders. They only have access to the FICO score, which is not a very bankable option for payday lenders.

More On Scorista

Scorista offers a broad variety of products ranging from credit assessment to underwriting plans, verification plans, individual scoring, and variable kits, which facilitate scoring and dossiers that legally provide access to complete information about the borrowers. Its prime spot is borrowers looking for less than $5k for less than 12 months. According to Veikhman, Scorista has a 93% forecast accuracy rate. This is much higher than anything available for the segment currently.

This performance has led to profitable growth with offices in China and clients in Russia, China, Kazakhstan, Spain, and Latvia. It has just launched its services in the United States. More than 142 lenders are currently using the Scorista platform, and it is processing over 500,000 applications every month. According to its website, Scorista has helped its partners earn an additional $145 million.

The company has raised an undisclosed amount of funding from Life.SREDA.

Scorista’s Business Model

Scorista’s business model is transactional-based. In Russia, Scorista charges an estimated $1K for every credit decision depending on the volume of applications. Credit lenders are provided with credit decisions instantly so that they can further approve or deny a loan. When the borrower files a loan application with the lender, the lender communicates the borrower file through an API or web interface. Its system receives the application, evaluates the same with its scoring algorithm, and provides a credit decision for approval or denial of the loan. In cases where the scoring algorithm depicts that the borrower can’t repay the loan, Scorista works out different models to predict the amount that the borrower can pay. So if a borrower is rejected for a $2,000 loan for a 3-month period, Scorista will additionally provide that he is a good bet for $1,000 for a 1-month period.

Scorista has developed artificial intelligence and machine learning-powered proprietary algorithms for its scoring systems. It keeps fine tuning its algorithms to ensure optimum performance. It is focusing only on its specialization of short-term micro-borrowers to ensure highest efficiency rates in the segment.

Competitive Advantage

The money-back guarantee is Scorista’s USP. Scorista is ready to refund the fees to its clients if they are not satisfied with its services. Others in the industry are generic players looking to cover the entire market rather than specializing in any one segment. In the name of alternative data, many peers focus exclusively on the social media footprint. However, research shows that decision-making based on social networking is not very reliable as the quality and quantity of information available on borrowers is circumspect. Moreover, about 40% of borrowers do not have extractable social media information available.

Scorista has also introduced Mindscore, a psychometric scoring method that uses a social networking profile and psychometrics to score borrowers. It helps in predicting repayment ability, and the default rate of the applicant.

According to Veikhman, using alternative data in the credit model is dependent on the country. Credit bureaus across Russia have a lot of data on borrowers, and, as such, alternative data is not able to add a lot of weight. But there are no reliable credit bureaus in China so a lot of e-commerce data from Alipay, Wechat, and other social media is put to use. The company is also using mobile data in some cases and incorporates details like the workplace of the borrower to make a credit decision.

The Russian and Chinese branches of Scorista have launched a white label product for mobile applications for lenders. It facilitates fast issuance requiring the borrower to download the application and then submit information to the lender. Scorista performs the function of scoring and the lender can directly issue money through the application, credit card, debit card, or bank account.

Integration

Scorista mainly integrates with short-term lenders and specializes in facilitating short-term loans. Although banks have a broad line of products, Scorista can work with banks that deal in short-term loans apart from full-term loans.

The sub-prime segment that Scorista specializes in is growing across the world. The global economy is not getting better, and many economists agree that it is in the last legs of the growth phase. The last recession was in 2008-09, so considering a cycle of 10 years, we are looking at a recession sooner rather than later. Also exacerbating the trend is the fact that the number of people drawing a lower than average income is increasing in every nation across the world.

Borrowers with low credit scores can improve their credit ratings by following a regular, structured repayment schedule. This will enable them to have access to better loans and banking products with lower rates of interest. Scorista,, with its credit models, helps borrowers gain that access to credit at the right time for the right amount.

Scorista’s Future Goals

Scorista is looking to expand across global markets. It is looking for partners in multiple countries to expand its offering. It is also looking to onboard well-connected financial investors who can help introduce them to their lending networks.

Scorista wants to establish itself as the FICO score for the sub-prime borrower segment. Its key differentiator is its specialization in only short-term microlending and its money back guarantee. The company has been able to build a solid business and is on the precipice of breaking into the big leagues.

Author:

Written by Heena Dhir.

Testimonials

default image

"Your daily letter is great!" , Ram , Founder and CEO, PeerIQ

default image

"Hi George - just want to tell you that you are doing a great work with Lending Times;-) Brgds, Kasper" , Kasper, Partner and Co-founder at Dansk Faktura Børs A/S

default image

"I've been following your newsletter for some time now and have been very impressed with the content." Charlie,Co-Founder | Bolstr

default image

"Hey George, I must say I really enjoy your site. It has inspired me to do some changes at our platform and we are the biggest consumer lender in Sweden." , Ludwig, CEO @ Savelend Sweden AB

default image

"Your daily email is very useful. It gives quick update on what's going in the market. Thank you very much for all that info." Yann Murciano, Head of Base Metals Trading at Morgan Stanley

Our daily p2p news digest

Daily News Summary Digest Sent Daily To Your Inbox