Toyota Financial Services U.K. Teams Up With Alternative Credit Scoring Startup | Auto Finance News

Toyota Financial Services U.K. Teams Up With Alternative Credit Scoring Startup

Aire, an alternative credit scoring startup, raised a $5 million Series A funding round and announced a partnership with the U.K. arm of Toyota Financial Services yesterday.

The round was led by Sunstone Capital along with White Star Capital. Aire’s funding now totals $12 million.

Along with a partnership with Toyota, Aire is also working with financial services peer-to-peer platform Zopa. The London-based company will use the funds to drive recruitment, according to a company press release. And, while the company does not currently work with any U.S. based lenders, it does plan to be within the first half of 2018 as the company pushes out internationally, Matt Davies, head of partnerships told Auto Finance News.

Employing a broader approval process is especially suitable for thin-file borrowers, who tend to be young customers new to financing. One in 10 American adults has no credit record, making it difficult and often impossible to underwrite using traditional methods, according to the Consumer Financial Protection Bureau.

And Toyota Financial Services U.K. is not the only captive exploring the alternative credit field, as Ford Motor Credit Co. recently decided to change its approval underwriting process to incorporate machine learning to look beyond credit scores by working with ZestFinance. Ford Credit said at the time that capturing first-time buyers and younger buyers are part of the motivation for a more holistic approach to credit.

Founded in 2014, Aire uses artificial intelligence and machine learning to form a comprehensive understanding of the stability of thin credit files. Because Aire’s credit risk analysis gives lenders access to a new pool of thin-file borrowers, the company has seen credit approvals for its lender network grow by up to 14% on average without increasing risk exposure. The company uses AI tools like “interactive virtual interview” which acts as an underwriter by engaging with an applicant “to evaluate their profession, education, lifestyle, and financial maturity,” according to the company’s website.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.

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