One of the biggest issues facing finance houses today centres on running credit checks on the client without causing unnecessary complications for said client and one increasingly successful way to do this is to work with smart data as opposed to big data. One company that is doing this is Creamfinance, an online consumer finance company that caters to near prime consumers and that was founded in 2012 in Latvia. It has subsequently experienced exponential growth, expanding into Poland, where its headquarters now are, the Czech Republic, Slovakia, Georgia and Austria, where its IT system is based.

Unique offering

“Creamfinance doesn’t compete with banks: we are providing smaller and more convenient loans for the consumer,” says Matiss Ansviesulis, co-founder and CEO of the company. “Our business has expanded very fast across different geographies because it is based on technology that is about managing the process of approval for loans scoring for clients and this can be rolled out across borders to different countries.” He points out that while five of the countries Creamfinance operates in are members of the EU, Georgia is not, a clear indication that the business model has the potential to expand the company much further still.

Understanding the options

Creamfinance provides three types of loans: instalment loans allowing customers to borrow, say, €2,000 over 24 months and pay back the capital and interest in monthly instalments over two years; lines of credit, which are similar to a bank overdraft and allow customers to draw the credit they need on a revolving basis and also have a time limit; and small loans. These will typically be for a few hundred euros and will be repayable within the month, but although they sound similar to the widely criticised payday loans in the UK, they are in fact quite different. In much of Europe, interest and regulation on this type of loan is much more tightly regulated than has been the case in the UK.

Credit risk

What these three types of loan and indeed any type of loan have in common, of course, is that it is vital to assess the credit risk of the would-be lendee. Traditionally this has been done through concentrating on a process known as big data: “This focuses on volume and velocity, the size of the data and how fast it can be processed,” says Ansviesulis. However, not only can this be time consuming and laborious: it can also frustrating for the client who might have to fill out pages of information and then have to wait for an answer. One of the reasons behind Creamfinance’s success is that it utilises a different and considerably more streamlined process known as smart data.

Ensuring accuracy

“We are much more concerned with the value and the accuracy of the data we’re getting,” says Ansviesulis. “We’re focused not on getting as much data as possible but looking for data that is valuable while ensuring it is still accurate. For example, we check with credit rating bureaus to see if there are unpaid loans or, say, utility bills, but we also have to check to make sure the data is not obsolete.”

That not only speeds up the process for Creamfinance, but it makes life considerably easier for the clients as well. “The overriding feature of what we provide is convenience,” says Ansviesulis. “We’re stripping away the nonsense so many customers have to go through and we want to make it as simple as possible, so clients can get their loans with just one click. Even now, it is still difficult to get a loan and the consumers don’t care if they’re using a bank or not: they care about the price and convenience.”

Delivering on promises

The success of Creamfinance’s approach speaks for itself. “For companies that use big data as their driving strategy, the client needs to give a lot of information, fill out a lot of forms and there’s a big gap between what big data promises and what it delivers,” he says. “But we are in the process of delivering a prototype that sticks to what we know and delivers one click convenience. Smart data is still not so mainstream but the value of what it delivers is much higher than big data. It actually really works.”