Tala is a fintech startup using mobile devices in emerging market countries to generate credit scores and grant micro-financing to those who don't have traditional access to banks. They use more than 10,000 data points (not a typo) from a user's mobile phone behavior to generate credit scores in emerging markets. With this credit score users are able to get instant short term loans in 5 minutes underwritten by Tala, all from their mobile device. The company then tracks customer repayment over time and can offer better interest rates and more generous loans to users that show good financial behavior. They report they are highly profitable.
Tala launched initially in Kenya with its HQ in Santa Monica, California. Its product offering is available in Africa, Southeast Asia, and India at this time.
Why I like Them
This is the most innovative product I've seen in FinTech in a very long time (enough to get me over my instinctive app company skepticism). The algorithmic ability to instantly generate a credit score from someone's mobile phone data is light years ahead of the standard FICO score model and a brilliant idea all on its own. By all reports their credit models are far more indicative of someone's financial behavior than traditional FICO score models which are not nuanced enough and uses few data points. It makes sense since in today's world nothing knows you as well as the mobile device that you engage with constantly. The obvious question is why traditional banks aren't doing more here as it would help them control their risk pools much better.
Beyond there is a huge untapped market here. There are an estimated 2 billion people on the planet that do not have a credit score or any sort of financial identity but would leap at the chance for micro loans. Tala is brilliant to offer this product in emerging markets only for now - they know exactly who and where their customers are. More than 90% of first time customers fully repay loans with 95% coming back for additional loans after they repay the first. It is easy to see how this creative approach could become dominant even in the developed world since it gives a much more nuanced and detailed financial profile of a potential borrower.
Disclosure: All information is from publicly available sources, I have not had any contact with a member of the company or its investors.