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Consumer Credit

Accion Venture Lab to empower additional creditworthy consumers through investment in Aire

By CreditMan Tuesday, April 12, 2016

Financial inclusion pioneer Accion has announced that it will help more creditworthy households responsibly access credit and build their financial histories through a new investment in 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.

"Around the world, millions of people cannot access the credit that they need to launch businesses, buy homes, or build better lives," said Accion CEO and President Michael Schlein. "In many cases, this isn't because they have bad credit history, but rather because they have no credit history. By providing an alternative to traditional credit scoring, Aire helps to extend financial services to more people who need them."

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.

"Accion Venture Lab has been very supportive of our research and product since our early years. I am really glad to have them come onboard now as we start our international expansion," said Aire co-founder and CEO Aneesh Varma. "Both Aire and Accion Venture Lab really care about improving financial inclusion around the world."

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.

"This investment builds on the Accion Venture Lab's deep commitment to promote financial inclusion through the use of innovative ways to assess creditworthiness," said Vikas Raj, Director of Investments for Accion Venture Lab. 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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