Estonia is known for being one of the most innovative countries in Europe. It is the birthplace of several unicorns (not the fairytale animal, but the privately held start-up valued more than $1Bn). What is their secret? It seems that the key competitive advantage is bringing simple solutions to various services. Our new loan originator – Credito is following the suit. They offer just one product and are not trying to reinvent the wheel.
Usually, loan providers have a debt collection department, to reduce the number of non-performing loans. The founder of Credito, Marko Ott, started the other way around- he was operating the call center and bad debt collection company before opening the fast credit company. He saw that there is a niche on the market- many working individuals wanted to borrow money to make long-desired trips, or renovate their home. So, after contributing own funds Marko Ott has started Credito in 2012 (Credito is a brand name of PC Finance OÜ. It means Credit in Italian; this name brings some Southern sun to this Northern country).
How it works
Credito offers only one product- a loan up to Eur 3,000 for the term up to 3 years. The interest rate is competitive in the industry with zero fees. For example, when a client borrows Eur 1,000 for 12 months, with a fixed interest rate of 44.67%, the CCM is 56%- the total amount payable at the repayment date is Eur 1258.13
The screening process of eligible clients is very conservative – the rejection rate is around 45% and it is the core of the business model, as Credito is primarily targeting the returning customers. So, once the client gets approved and receives the loan, the customer relationship manager works closely with the client and offers him or her to take the loan repeatedly. This approach seems to work, as more than 65% of clients are returning. This strategy is what differentiates Credito from competitors- they are deliberately oriented on existing customers. The “ideal” client is aged 25-55, a creditworthy individual with medium or higher income. Majority of existing clients are employed and creditworthy, but they need a loan to make a home or car repair and traveling. The average loan amount is around Eur 1,000 and the interest rate is in line with Estonian law. The returning clients don’t face the scrupulous screening process, as the first-time clients- their loan application is approved within 15-20 minutes after submission.
State of affairs and future plans
The market is becoming competitive, and Credito doesn’t ignore any company but is treating everyone as competitors. This allows to always be alert and finesse the service they provide. However, Credito is in safe hands, as the management is trusted to Reimo Tomingas, a very skilled CEO. Reimo has a Master degree in law from Tartu University. For thirteen years he was running the financial-legal sector company. Besides that, he has very good knowledge and know-how of credit management, scoring, debt portfolios and dealing with them. Marko’s experience in the financial sector, building up systems and automized services with new IT platforms is very useful for the company. The team is small but highly experienced, plus the decision-making process is very quick.
However, the most important key to success that this team possesses is not the experience, but the desire to bring quality products and service to consumers. It is very satisfactory to realize that the service you provide can help consumers.
The goal of the management team is to grow the company first locally, then expand to other countries. However, the main challenge right now is the availability of capital. Currently, the loan portfolio is below Eur 200,000, however, the demand is growing. There are around 800 customers, who would borrow around Eur 1,500-2,000, so the cooperation with a P2P platform like Grupeer is vital for future growth. The short-term plan after partnering with Grupeer is to grow the portfolio for the next six months. Ultimately, the strategic goal is to grow 10 times bigger and enter the new markets.
Grupeer is very excited to find new partners and to offer only the best investment opportunities to our investors. This target-driven company has conquered our hearts, plus we are finally addition loan originator from neighboring Estonia.