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Koto raises £1.3M to launch UK’s first “challenger lender” proving fixed-fee credit alongside e-money accounts to 12 million creditworthy consumers ignored by big banks

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Koto, the UK’s first “challenger lender” – a credit provider built on e-money – is launching officially in the UK today alongside the close of a £1.3M investment round. The FCA authorised credit provider will help the UK’s 12 million (and growing) creditworthy “near-prime” consumers, who have fewer credit options to meet their financial needs, and none with the levels of functionality and flexibility offered by popular neo-banks. Koto’s low, fixed and easy-to-understand fee structure takes the fear out of credit alongside an enjoyable, totally mobile experience.

The funding will be used by Koto to acquire its first 50,000 users, train its AI credit risk systems, expand operational capacity, refine its UK marketing, and grow its team.

Koto’s customers are typically excluded by big banks because they have “inconsistent income” (freelancers or the self employed, for example), are new to credit or the UK, or have a mark against their credit history. With the coronavirus pandemic heavily impacting many individuals’ finances, access to safe alternative sources of credit is arguably more important than ever.

It is able to lend to a wider range of consumers by using its unique credit risk modelling capabilities, proven by its sister company, Monobank, and its 2.8 million customers in Ukraine, and adapted and developed further for the UK market. Koto’s “hybrid scoring” utilises traditional credit scoring from Experian Delphi alongside its proprietary machine learning modules, which take a closer look at individual customers to assess their eligibility for credit and likeliness to repay.

Koto is FCA authorised and consumers can use the virtual card to make purchases wherever Mastercard is accepted. Underpinned by a smart mobile app that helps people track their spending, Koto has two credit offerings, both of which come with transparent, fixed fees:

  • Extra acts like an arranged buffer, providing up to £400 of credit for a fixed fee of 20p per day.

  • Spread gives customers the ability to distribute larger purchases of up to £1,000 over up to 12 months for a fixed fee of £10 per month. This model of structured credit has been developed to prevent the cost of credit  from spiralling, with time to repay limited to a year.

Koto’s entire offering is purely app-based, where its mascot, the koto cat, makes monitoring cash flow and applying for credit stress-free and accessible. Koto strives to be wholly community-driven, using its access to a large team of developers to build new features as requested by users. Initial features include:

  • Industry-leading onboarding process – customers can be up and running with koto’s virtual card in less than 10 minutes and can have access to credit it under five days, while other near-prime lenders’ onboarding processes take from 5-14 days. The entire experience takes place within the app, which is also safer than traditional applications.

  • Digital wallet – koto is the only near-prime credit product which can be added to Apple Pay and Google Pay.

  • Shake to pay – shaking a mobile device near another device in order to facilitate a cash transfer, this cool feature can be used for sending money to friends and even tipping waitstaff without having to enter in their bank details

  • Spending tracker with frequent alerts – ensuring users never lose track of their spending or what they owe; uniquely, Koto gives users a breakdown on how they are spending their loans as well as the outgoings of their current account

Koto is being launched in the UK by Executive Chairman Misha Rogalsky, the co-founder of Ukraine’s first mobile-only bank, monobank. Monobank uses a similar business model and broke even within 10 months from launch. As of 11.11.2020 monobank has more than 2.9 million users. It is currently en route to becoming Ukraine’s second biggest bank within 3 years of launch. Rogalsky has brought on Rob Escott as CEO of London-based koto, who joins having run Credit Operations at Vanquis Bank and before that worked at both Deloitte and KPMG.

Misha Rogalsky, Executive Chairman of koto, said:

“Despite being the founder of a successful business in Ukraine, when I first moved to London I was unable to access credit from high street banks. This is because I was considered “thin file” – I didn’t have a UK credit history the banks could base a decision on.”

“We founded koto because there are 12 million other credit worthy people in the UK who are excluded by mainstream lenders. After proving our business model in Ukraine, we are excited to disrupt the UK consumer credit market with a company that brings a prime product, experience and service to near-prime credit. We’re here to take the fear and stress out of credit in the UK.”

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