Credit fintechs: how to implement a collection culture in small startups?

[muskanislam25]

At the most delicate moment in the economy, many credit fintechs began to face a problem that had never existed before in their operations: an exponential increase in defaults! All of this was due to the pandemic, which made it difficult for borrowers to pay their loans, associated with a lack of collection culture and processes. What now, José?

In recent years, the credit market has been revolutionized by the arrival of startups focused on the financial market. Known as credit fintechs , they were created to streamline the granting of loans with more attractive interest rates, in addition to allowing the unbanked to access financial services.

Until before the pandemic, credit fintechs were experiencing an extremely positive scenario, with easy access to funds from large investors. But in the meantime, with many people losing their jobs and the increase in defaults, the source of (easy) funding has dried up!

Faced with difficulties, credit fintechs sought Lebanon telegram data from the BC (Central Bank), which approved the issuance of credit cards by them, and fintechs classified as SCD (Direct Credit Society) will be able to act as BNDES agents.

Understanding Default in a Credit Fintech
In addition to the aforementioned difficulties in raising funds, credit fintechs have been observing a previously unnoticeable problem in their operations: an increase in defaults. And with this, many have observed (in addition to its impacts), the lack of internal collection processes. How come?

One point that must be clear is that most credit fintechs are small, that is, they have very few professionals, low automation of internal processes and an almost exclusive focus on customer acquisition and granting credit.

The problem is that when you “see” or focus only on the beginning of the credit granting process, the possibility of these credit fintechs having serious difficulties in collecting debt or generating new business is immense.

This happens for several reasons, but one of the main ones is that many credit fintechs end up only evaluating whether or not the applicant has financial restrictions in the market. In this case, people are granted credit, but their future payment capacity is low according to socioeconomic information that has not even been evaluated. In addition, of course, there is a lack of reliable contact information.

How to improve the collection process in small credit fintechs?
According to Think Data , a leading information bureau for servicing the country's leading credit fintechs , the first step is to automate the granting process. Even if the company has a small volume of analyses per month, it is important that they use technologies that enable the rapid and secure validation of the profile of credit applicants.

Many companies think that automation is more expensive – but this is not always true when you look at the timeline. For example: with a low average loan amount, it is not necessary to evaluate credit restriction indicators, which means it is possible to reduce costs and have similar security in the process.

Another important point is to ensure that the registration data provided by the applicant at the time of granting credit are checked (and are correct), thus enabling future collection actions to occur successfully.

There is no point in imagining that carrying out a registration enrichment process after difficulties arise will bring the same return as when evaluating a registration upon its entry, as often, the concession may be being made to an unbanked customer (or it is a fraud), which will make it difficult to receive it later, generating the much feared FPD (First Payment Default) or First Unpaid Installment.