Why we invested in Infact?

By Kibriya Rahman

Fintech

Posted
September 25 2024

The Need for Real Time Data in Credit-Decisioning

Credit reference agencies (CRAs) are an integral part of the lending landscape and impact every one of us in the products we can apply for and receive; both for credit and lending, but they also touch jobs, rentals, insurance, utilities, and telecommunications.

However, the industry is monopolised by a few giants. The four largest (Equifax, Experian, TransUnion and Fico) have a combined market cap of ~$150bn and they are mostly 50-100+ years old. This legacy and lack of innovation, both in outdated technology and operational complacency, has created far reaching consequences for both lenders and society:

• Data is often reported 35+days late, preventing lenders from having an up-to-date view of borrower’s financial health. This results in inaccurate assessments and ultimately higher defaults and losses. For consumers, it increases the risk of individuals borrowing beyond their means, potentially leading to debt, court actions, and enforcement.
• Data is inaccurate and incomplete. There are over 240m identity records for the UK population, and data discrepancies and incompleteness are rife. Lenders have an incomplete picture of a borrower, resulting in them spending more to improve coverage, missing out on revenue opportunities, creating bias and exclusion in their decisions, and exposing them to regulatory and compliance risks. For borrowers this leads to financial exclusion and credit invisibility – 10m UK consumers and 1.7bn consumers globally – resulting in a higher cost of borrowing, or the reliance on predatory lenders.
• The legacy infrastructure and lack of competition drives up costs for lenders and, in turn, consumers. It results in a lack of innovation in financial products, leading to a poor customer experience overall.

A prime example of these systemic issues is Buy-Now-Pay Later (BNPL). It has grown considerably in popularity, with more than 10m estimated users in the UK, and accounting for more than £1 in every £7 spent online. As a product, it can help as a gateway financial service to include consumers in the broader financial ecosystem. BNPL is often criticised for allowing vulnerable customers to stack loans, however, this is unfair. As a credit innovation they are just poorly enabled by the supposed underlying infrastructure blocks. Real-time data could protect customers and the BNPL business model, and it could transform the way that customers enter the financial services eco-systems by using BNPL as a proactive driver of financial inclusion.

A Once in a Generational Opportunity

If CRAs have dominated for over a century, why hasn’t disruption occurred before? The answer lies in market timing. Several factors must align – regulatory shifts, technological advancements, and changing consumer behaviour. The last time similar conditions converged was post-global financial crisis with the rise in payday lending, leading to the emergence of Call Credit which was eventually acquired by TransUnion for £1bn.

We are once again at a pivotal moment. Tough macroeconomic conditions have tightened underwriting demand and lowered the risk tolerance of mainstream lenders. This has seen consumers adopt BNPL and digital finance en masse, driven by inflationary pressures and a cost-of-living impact. The technology has dramatically improved: API based data sharing is the norm in other sectors, and AI/ML and analytics improvements have reduced the reliance on old credit sores. Finally, global regulators are stimulating action: BNPL regulation is incoming, the FCA Credit Information Study has proposed changes to encourage competitive opportunities, the Consumer Credit Act will modernise the consumer credit regulations, and the FCA Consumer Duty focuses on better data to support customers.  

The Perfect Team to Lead the Change

Transforming the credit industry is no small feat – it requires deep expertise, technological prowess, credibility, and an ambitious vision. Enter Will and Andy, who are uniquely positioned to lead this revolution. With over 13 years of experience in the consumer credit sector, they previously built an open banking platform at Runpath, covering 45% of the UK market, which they sold to Experian. At Experian, they held roles as Product Director and CTO respectively, and oversaw the powering of half the credit comparison market and ran product development and enterprise sales agreements.

Their experiences motivated them to build Infact: a real-time credit bureau for the modern credit market, and its mission is to allow for better protected consumers and lenders. Infact has reimagined the lending infrastructure by providing a real-time data platform that enables lenders to exchange accurate, timely information. It has built a scalable and borderless platform, providing real-time risk data with increased accuracy and context to provide a true single customer view. Crucially, it is built around financial innovations.

Since its formation in 2022, when we first supported the business, it has achieved milestones at an astonishing pace. It has obtained FCA authorisation to become a regulated CRA and has built two products: an affordability product and a credit risk service. Lenders are already finding these mission critical and are seeing a material impact on lending decisions.

This funding will accelerate the growth of the team to deliver the roadmap for the vision.

Closing Thoughts

Infact is on a mission to become a generational company, transforming the way lending decisions are made and positively impacting millions of lives worldwide. We are incredibly proud to support Will, Andy, and their talented team in this journey; and are delighted to have led the £4m Seed round alongside our friends at 13books Capital, Outward VC, Form Ventures, and Portfolio Ventures.