Winning on e-commerce, Story of Kviku

Kviku was founded in 2013 as an online travel assistant. Thanks to Kviku customers could finance their flight tickets.  This was an innovative service in Russia and was very easy to use. This service was so welcomed by consumers, that the management understood that the whole e-commerce market was very hot back then and there is an urgent demand for innovative companies in this field. Soon, Kviku started offering financing for the purchase of electronics, clothing and even cosmetics.

So-called point-of-sale (POS) financing is very popular right now- it allows consumers to purchase goods in credit at the point of sale, it is simple as that. This service is particularly popular with millennials, who struggle with credit cards. A study found that 3 in 5 millennials carry their credit card balance from month to month and 45% of them don’t even know what is the interest rate on their credit card. Moreover, the study by Federal Reserve found out that people aged 20-35 hold 30% less credit card debt than the same generation 20 years ago. However, these consumers are willing to borrow to buy a specific product such as an iPhone.

In other words, Kviku understood the market trend and made the right decision at the right time. For consumers, POS lending offers transparent, fixed-payment loans and for merchants, POS helps to boost sales, increase conversion rates, and smooth cash flows. Another study found that companies that implemented an online POS financing option experienced a 32% increase in sales. This has allowed Kviku to become a leader in e-commerce financing market, and make partnerships with top-5 online retailers in Russia.  Besides that, clients use Kviku’s online credit card, to make purchases online- 30% of clients use it for paying in AliExpress.

Client profile

As the trend suggests the service became increasingly popular with millennials- people from 20-30 years old. This generational cohort was born during an era of internet and are used to make purchases online. However, later the service started to attract a wider clientele since the smartphone usage rapidly increases among the older population. Now the age profile ranges from 20 to 50 years old- consumers appreciate the availability of various financial products in one place- the mobile application.

Key people

Both founders have extensive experience in local and international companies. Nikita Lomakin, the CEO of Kviku has worked in Morgan Stanley in both Moscow and London offices, specializing in debt capital markets and later in VTB Capital, the renowned Russian investment bank. Veniamin Lipskiy has specialized in strategic consulting and auditing in Russian and international companies. Together their experience and skills have made the winning blend for starting a fintech in Russia. During their employment in such prominent international companies, they have worked with local Micro financial companies, advised on strategy, and saw the need to switch from offline business model to online. Because they saw the mistakes and flaws of such companies, they understood how to make it better.

Thanks to the experience they momentarily spotted the niche in the market and went for it. Founders on purpose decided not to offer PDL (payday loans), as there were already many market players at this point. They saw the trend of moving financial services to online space and moreover they understood that the cost-effectiveness defines the strongest players, not the volume of issued loans.

Nikita and Veniamin were so passionate about their idea that they knew for sure it will become successful but didn’t have a clue that it will become so big. At the first stage two entrepreneurs have only contributed their own savings, which weren’t a lot, however, when it became clear that the business is developing rapidly, they decided to attract investors. The round of financing was essential to bring the level of operations to the current level.  It was very important for founders to retain control over the company and its strategic decisions, luckily the external funding agreed with these terms. Nikita and Veniamin until now participate in the day to day business, this comes with some risks, however, it is very rewarding too, as Kviku is the product of their own efforts. Given the profitability, the staff number is quite low- just 35 team members, some companies with the same revenue figures sometimes employ ten times more people. This is proof that only highly qualified and productive professionals are part of Kviku. Moreover, because the company is technologically advanced, most of the trivial operational processes are automated.

State of play

Five years later- Kviku is one of top 10 biggest Russian micro financial organizations. The numbers speak for itself- the volume of issued loans is more than $20 million and all of this is achieved with average loan of around $50. Currently, its loan portfolio is Eur 10 Million. The main products are virtual credit card and POS loans (APR 20%), the third line of service is installment loans (up to $1500 with APR below 300%), but this is available only for returning customers. The portfolio split is 50% between POS and virtual credit card, the other half constitutes installment loans. The average loan duration is 6 months.

During the rapid growth stage, most of the business came from first-time clients, however right now more than half of volume is generated by returning clients, which is very important in this industry. Kviku knows the behavior of returning clients much better and offers more products.

The scoring model

The application is very easy- just 7 fields, the customer fills it in seconds. However, after the application is submitted, it is evaluated by the sophisticated machine learning scoring model, which uses 30 databases (Big Data), more than 10 thousand parameters analyzed within 20 seconds. The decision on a loan application is absolutely automated and doesn’t require human efforts. The scoring model helps prudent lending procedures, as the rejection rate is 80% for first-time clients. The model is constantly improving and analysts are working hard to master the fraud detection mechanism.

The real test happened in 2018 when Kviku decided to expand to international markets- to Kazakhstan and Spain. This would assess if Kviku’s business model is really effective and would work in different economic conditions, jurisdictions and with different level of regulations. The expansion was so successful and proved that Kviku’s business model can be scaled- in 2019 Kviku will explore absolutely new territory- Poland and South East Asia.

Kviku doesn’t have a particular translation or meaning in Russian, that was the plan- not to be associated with anything and create an absolutely new brand in customer’s minds. In English, however, some associate the brand name with word “quick” and that is not too bad, as Kviku is a very responsive service. The company’s logo uses panda, well who doesn’t like pandas? We at Grupeer definitely like everything about Kviku- its business model, motivated founders, and the prudent lending practices. Let’s welcome Kviku on our platform, and are wishing good returns to our investors!

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