Katsuba Files  – Combining Microcrediting and IT

Alexander Katsuba, co-owner of a company operating under the MyCredit brand specializing in microcredits, on combining financial business and IT opportunities for disruptive results.

Along with our partners, our microcrediting enterprise is currently operating across the Ukrainian market, Vietnam, and Sri Lanka, and we are opening in the Philippines and India as well.

As you may know, the microcredit business traditionally tends to gain a negative perception. However, we position our business exactly as an IT project and not as a financial institution. Is it safer that way for our reputation? Let’s dwell on it a bit.

I believe that the main thing is what stands behind the solution you offer. How much you invest in your product’s mathematical modeling, risk insurance, convenient application, and, of course, marketing. Microcrediting draws much more from IT than traditional financial institutions like banks, for example.

We issue short-term loans for 3-5-7 days. Several loans per minute (at least it used to be that way before the war). We do not require proof of income. Decisions are made based on deep analytics and data science. Building this model is quite difficult, but it allows us to achieve progressive results.

Who is the target consumer?

The enterprise is focused on providing a “payday loan” or enabling anyone to “buy a gift that was not counted in the budget for the month.” And this is a service of convenience, not long-term lending. You borrow 2,000 to return 2,100, but you don’t have to borrow from friends or from your mother.

This eliminates the issue of commonly unreasonable interest rates that people accrue and cannot cover over time. We are not a bank, we do not borrow for months and years. We believe that people are responsible for their finances and financial planning.

And that’s why our loans are issued not by a person but by an analytical model. The decision to issue a loan is determined based on many factors, up to the time a person takes to fill out a questionnaire. We have a fairly low no-return rate.

Thus, we disrupt the microcrediting stereotype by being a digital financial service at the core. The service where the convenience of short-term service is more important than the financial component. It’s like Monobank. You pay not for a banking service as such but for a convenient service.

Why not go for a new Monobank, then?

At the very least, my partners and I did not have so much money to open something like a Monobank in scale. By the way, our company appeared before Monobank entered the market. But in all seriousness, in order to open Monobank, you need either your own full-fledged bank or a partner bank.

We did not have a partner like Universal (Monobank’s partner bank), and we needed too much money for our own needs. We spied the idea of microcredits in Latvia, actually. in the Baltic States, the microcredit market was actively developing even before 2014. For several years, we have been developing a model and forming a marketing strategy. Now, we are the second in the Ukrainian market and were actively growing before the russian invasion.

Wartime business and Asian markets prospects

Naturally, during the time of war, the demand dropped significantly. But for our part, we began to take into account new risks. So the overall market has declined. Although we remain among the TOP-2 in the market, we still focus attention on the development across foreign markets.

And that is why we focus on Asia so much. Indeed, we are very satisfied with our investments in Vietnam and Indonesia. Sri Lanka is now going so smoothly right now, although the market there is still promising. Next, we plan to open in India, which is currently the largest market in the world.

Why these destinations exactly? Asia has a different culture of information consumption. Our service, in fact, is an application in a smartphone that issues loans according to a mathematical model. 90% of its operation are fixed on convenience and marketing.

In Asia, almost no one has computers or laptops, and all work and household issues are solved with a smartphone. So our service is perfect for such a consumer mood.

Stay tuned for more Katsuba Files, more firsthand insights, and more updates coming soon.