Data will improve the lives of the unbanked
Interview with Ted Martynov – CEO and Founder of Carmachain (*)
Why did you create Carmachain?
CARMA is a natural extension of my background which is consumer lending. I spent many years building different lending companies in Ukraine before moving to Myanmar in 2016 to start SolarHome. SolarHome is a pay-as-you-go solar company that is essentially a mix of lending and distribution. Running lending facilities in an unbanked country was very new for me. The biggest pain point was the lack of credit data for proper credit assessment what is a horrible situation for every lender. Solving this issue become my passion and I left the company in 2019 leaving its status the biggest PAYGO solar in SE Asia to start CARMA the world’s first credit data marketplace.
Who is in your team?
Lina who also worked for SolarHome joined CARMA as CTO six months later. She is extremely talented software engineer with enormous experience in data intelligence. I parachuted myself in Kenya in the midst of 2019 for a ground survey and we were lucky to deliver MVP closer to Jan 2020. We are still in search of CSMO and I hope this highly valuable team member will join us in the next weeks to start building distribution channels.
Which are your products? Clients/Target Clients? BAHG?
CARMA aims to fill in the gap for credit reference services in underserved markets. There are 85 countries across the globe experience this problem mostly from Africa and SE Asia. The demand is coming from lending organizations that would like to have better manageability of default rates through overindebtedness control and fraud prevention. Over Indebtedness became a huge issue even in the western countries after the pandemic outbreak as it affected income sustainability nearly everybody what caused withhold granting new loans.
CARMA is fundamentally different from traditional credit and designed to be a really quick fix of the problem. We withdrew from aggregating data into a centralized silo. Centralized data silos are vulnerable to hacking and what is more important it requires organizations to give away their entire databases. Our ground survey revealed many cases when even a good working credit bureaus environment able to collect only negative credit histories because positive information is not contributed by organizations. This approach is simply lack of transparency. We organized data sharing in a fully distributed and decentralized way. Data contributors transfer only query-related data leaving the whole database behind company’s firewall. This also created an advantage of access to real-time data that is critically important for fraud prevention among digital lenders who are the new trend of unbanked economies after mobile money introduced itself a few years ago.
Dealing with unbanked economies also brought us to an interesting takeaway. A lot of data sits with non-financial industries. Unbanked customers actually made a lot of digital footprint up to date. CARMA‘s credit data marketplace is totally inclusive for data of any b2c industry. Data contributors receive a reward every time lenders hit their information what made a quite unique revenue stream that was never introduced before.
Access to credit data is only the tip of an iceberg. At the end of the day, we see CARMA Protocol could make a secure connection between enterprises across the globe. Companies could securely leverage personalized or personalized data for the benefits of HR, R&D, marketing from each other. This might be another internet. Internet for corporate data.
Faster, less riskier and cheaper credit?
We were fortunate to sign an umbrella agreement with a huge association in Zambia where the situation with credit data is quite average with 9% (vs 11% average across Africa) rate of collected credit histories. The members of the accusation presume to share credit data within their group and acquire information from other local organizations as telecoms, PAYGO solar etc. CARMA facilitates transferring raw data what is a perfect feed for any scorecards. Accessible credit data helps lenders to reduce the time for credit decisions and improve the predictability of default rates which improves the quality of loan books hence lenders can give more money to creditworthy customers and mitigate losses of fraud and low-quality transactions.
The future for Carma?
CARMA‘s beauty is in its global context. The data goes directly peer-to-peer and CARMA works as a post office. We deliver “parcels” with data with no idea what is within the “parcels”. This liberates us from obtaining local licenses or putting IT infrastructure what means we can available everywhere where it is necessary right today. We made our baby steps in Zambia and making a close look at Nigeria. Some talks are coming from Bangladesh and Vietnam. We are going to be flexible in building the presence following signals of early adopters. We are happy to be in Benin, Senegal, or Uganda tomorrow after signing up for three or four customers.
We are strongly convinced that pay-as-you-go model works the best for our customers. It reflects with zero sign-up or subscription fees. Lenders pay only in case of hitting data, it entails processing reward to a contributing side. CARMA might be a smart alternative to credit bureaus. The credit bureaus usually charge per request.
Challenges, competitors and growth opportunities?
Starting up any marketplace is challenging and doing it for enterprise data even harder. Companies like the technology advantage of CARMA addresses the vast majority of their concerns in terms of data security but nevertheless the sales cycle is quite long what requires from the team and me to have enough durability. Global lockdown did not make it faster but exposed overindebtedness issue what made credit reference services critical.
We see a lot of startups trying to help lenders with credit assessment built around alternative credit data or fetching data from borrowers. We are fundamentally different, we give visibility to recorded data that sits deeply in enterprises. This makes us optimistic to improve credit risk for 530 million loan deals made annually in underserved markets.
What could CARMA do with a $1m investment?
This is going to help a lot. We are at the very beginning of building distribution channels. The technology requires more capacities to keep data security, applicability, compatibility elements on the highest level. Such investment injection would bring us to serving over 5 mln data requests bundled with access to 19 mln of credit histories. This is roughly $1 mln ARR for CARMA.
The interesting thing is unbanked left massive digital footprint since smartphones became available. This data is a real driver for many industries to find and deliver critical products and solutions for this financially underserved layer. I strongly believe CARMA is one of the missing puzzles in the equation of financial inclusion and building data-driven economics for Africa and SE AsiaTed Martynov – CEO Carmachain