Recently, digital loan companies took the center stage of Nigeria’s private data watchdog, National Information Technology Development Agency (NITDA), who found some of the lenders, who use ‘shaming’ as a debt-recovery technique, guilty of invading and violating the privacy of borrowers. Sokoloan was fined N10 million last year.
The development exposed a friction in the burgeoning digital loan market, especially in Nigeria. How can digital lenders recover their money without violating people’s privacy? A company has found an answer to the question, and is now raising millions of dollars to expand its services around the world.
Bfree, a Nigerian credit management fintech, which uses data provided by the lenders to build the user profiles of defaulters, running their data through an algorithm to predict their behavior and recommend the best way to collect debt, has raised $1.7 million in a pre-Series A round to expand into new markets where new digital lending apps are springing up.
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Investors include 4Di Capital, Octerra Capital, VestedWorld, Voltron Capital, Logos Ventures among other angel investors.
The latest round brings the total capital raised by the Lagos-based startup to $2.5 million, since it started operation in August last year. The startup raised $800,000 in a seed round last May.
Founded by Chukwudi Enyi (COO), Moses Nmor (CPO) and Julian Flosbach (CEO), Bfree is growing rapidly as ethical tech-based debt-collection tools. This means exploring new markets following the acceleration of digital loans. The market is buoyed by the huge number of underserved people shut out of loan services by traditional financial firms.
“We are going into markets with large populations, credit deepening and an underdeveloped regulatory environment, where a behavioral collection approach is likely to work,” Bfree co-founder and CEO Julian Flosbach told TechCrunch.
“We saw that there was like a little bit of a breach in the value proposition of lenders — they are good at giving out loans, but the aftersales services of the credit market didn’t work as collections processes were inefficient and not user friendly,” said Flosbach.
Bfree has found 16 new markets which include Ghana, India, Uganda, Brazil, Colombia, Mexico, Russia, Poland, Pakistan and Indonesia. The startup is now recruiting massively as it sets up operations in the new markets.
Flosbach told TechCrunch that Bfree employs the use of ethical debt collection standards and works closely with defaulters for tailor-made settlement options, with the end-goal of increasing the repayment rate and customer satisfaction.
By applying ethical debt collection standards, Bfree ensures the privacy of customer information during the process, explore flexible repayment options and do not lead to unnecessary penalties like lateness fees and debt-shaming.
Per TechCrunch, Bfree is currently working with 30 credit institutions, including digital lenders, micro-finance institutions and banks. The startup uses a two-way method, depending on a customer’s risk. It either directs them to a self-service platform, where borrowers set new payment plans using their phone number, or follows up on debt balance through automated communication (chatbots, callbots or IVR technology) or direct calls.
Using the ethical debt collection standards, Bfree has so far followed up with 1.1 million defaulters to date, and is currently handling around 800,000 customers, a majority of them in Nigeria. Flosbach said it anticipates the startup to be handling 1.4 million profiles by the end of next month.
Bfree’s ethical debt collection now presents a solution that will end the controversial method of debt-shaming, which has seen digital loan firms calling and texting friends and family members on the contact list of their borrowers.