Investment Notes: InDebted
Debt collection is an industry older than money itself and has long been synonymous with aggressive tactics.
Yet today a single tweet from a mismanaged customer can spark a blaze of backlash, so how does a brand ensure a 3rd party collection agency exhibits their principles?
Enter InDebted, offering digital debt collection for unsecured consumer debt where digital communications, the use of data and a positive user experience are the core objectives, as exhibited by 900+ 4.9 star Google reviews. Bad debts are no longer taboo, customers openly discuss their defaults in the Google reviews of InDebted, demonstrating the changing attitude towards credit products and confirming the need for a fresh approach to collections.
Consumer lending has expanded to include a whole raft of new Fintechs like buy now pay later (BNPL) providers which produce a high volume of low value debts, so recovery using a human collection agent isn’t economically viable.
InDebted solves for this: their collection process is 91% automated (with the goal to get as close to 100% as possible), enabling them to service this profile of debt and traditional debts more efficiently versus an incumbent’s servicing model and generate superior margins. 98% of customer communications are digital via SMS, social media, and email though customers can speak with a customer service agent if they prefer.
The company is disrupting an industry still predicated on letters and phone calls and operating debt collections as a low margin services business.
The Consumer Financial Protection Bureau (USA) issued a final rule in Oct-20 focused on modernising the collection industry in the USA and eliminating unfair practices. The CFPB have prescribed a structure as to when and how debt collection communications can be issued (including limiting the number of phone calls that can be made) and encompassing newer technologies like email and SMS. This is a significant endorsement for tech driven debt collectors and the regulation creates a blueprint to build the platform to coordinate communications compliantly.
The ruling coupled with credit market advancements have created the perfect conditions for InDebted. Fintechs choose InDebted because as a tech-first partner, they offer brand consistency and a quality service. Their machine learning algorithms optimise the method and timing of communications based on a customer’s profile, driving a 43% improvement in collections versus traditional agencies. The company works with many globally scaling Fintechs including several high-profile BNPL companies but it is also used by traditional providers of unsecured consumer credit such as banks, utilities and telecos.
InDebted has raised $25M+ to date from investors including MassMutual Ventures (South East Asia), Carthona and Reinventure.
OneVentures is pleased to announce the close of a debt facility alongside internal equity to support InDebted’s acquisition of Delta Outsource Group Inc. (USA) and growth capital for continued geographic expansion in advance of their Series B.
Josh Foreman (CEO), a technical founder, recognised early the strength of offering one platform to global lenders across their operating geographies, a key differentiator to other debt collection businesses. This unlocks potential upside, InDebted can quickly update the platform for each new regulatory environment and then rapidly scale and expand its own geographic reach alongside their clients. Josh has assembled a robust team to tackle the global roll out, having recently entered Canada and using debt financing, acquired a US collection agency affording them licensing to operate in all 50 states. New hires experienced in digital debt collection include Joe Gelbard, joining as Chief Revenue Officer and Tim Collins, joining as Chief Customer Officer, both located on the ground in the US to support the North American launch.
As a non-dilutive source of capital, debt is an attractive option to founders and their existing investors. Using leverage correctly also improves the return on equity, allowing the borrower to integrate and drive value from an acquisition before the next priced round.
As a lender but with a venture capital mindset, OneVentures offers more than just capital by giving access to the wider OneVentures platform including our partner, Viola Credit (IL) who possess strong connections in the Fintech space and our international business building experience.
Feel free to email me if you’d like to learn more about venture credit or to share your story with us — we’d love to hear from you: kmadden@one-ventures.com.
Read more about InDebted’s journey from the Australian Financial Review.
