How One FinTech Startup Reduces Default & Interest Rates Through Electronic Consigned Credit Management

There is no market in which we find that interest has not been reduced by our platform, said Álvaro Amorim, CEO of FinTech firm SalaryFits in Spain, and responsible for the company’s implementation in India.

SalaryFits is a spinoff of Zetra, a Brazilian FinTech with 18 years in the Brazilian market and leader in the electronic management of the loans with payroll deduction (consigned credit). It has a management system launched in 2002, called eConsig, that integrates the systems of banks for loans with the human resources of companies.

After 14 years, Zetra expanded to other countries, and nowadays, it has a presence in six markets besides Brazil through SalaryFits: Spain, the United Kingdom, Italy, Portugal, India, and Mexico.

Currently, the company is incorporating other services in the application, such as health insurance and other products and services.

Reduction of default and interest

In 2015, the default rate in Mexico for personal loans was between 3.1% and 5%. With the Zetra platform, according to company data, the default rate is currently around 1.60% for the company eNomina. Out of the countries where Zetra operates, Mexico is the only market that already had a payroll loan format similar to Brazil’s.

In addition to reducing default rates, the company manages to reduce interest rates in new markets.

We launched the SalaryFits platform in Portugal, and the partner bank provided consumer credit at an average of 9 to 11% interest per year. Through the platform and through the use of the application, we have been able to reduce the interest offered by half, said Amorim.

Further, Amorim talks about the implementation of the operation in other countries.

Are there many differences between the operation of a FinTech in Brazil and in other countries?

Álvaro Amorim: People are starting to ride this FinTech wave now in Brazil. In other countries, it is already more than reality. In Brazil, there is an excess of bureaucracy but the Central Bank is open for discussions and even consulted the public on the matter.

Zetra is fully compliant with the Central Bank’s requirements for lending businesses.

What challenges does your company need to overcome when expanding into new markets?

AA: First, we bring the concept of the new product in order to strategically establish the platform with the link between the payroll and the credit provider.

What is Zetra’s largest market outside Brazil?

AA: Today, Zetra’s second-largest market is in Mexico, and its India project is the most audacious. With regard to numbers, India will certainly be the largest scale that we will achieve. The platform aims to facilitate financial inclusion.

As per recent findings, only 23% of the population has access to banking and credit supply. The operation in India is already a year old. We will wait until the end of the year to run the pilot, and I believe that by the end of 2018, we will have an interesting scale there. [SalaryFits is one of the 20 startups of India FinTech Awards 2017].

How is it possible to reduce interest rates in new markets?

AA: The reduction of interest rates becomes natural with the process established through the platform. When we provide digital channels where the financial institution has access to a larger number of new customers and also has data from the payroll that the bank previously would not have access to, we create a new access model risk. That is an upgrade on the credit score.

We still count on the presence of the employer. It guarantees that at the end of every month, the employer will make the payment on behalf of the employee, who receives the salary already with the discount. Even the effort for the bank to sell the loan is practically zero since the offer is all digital.

Note: This content was published in partnership with StartSe, a leading Brazilian website about startups. The portal contains the StartSe Base, the largest database of startups in the country, with more than 5,000 registered companies.