Challenger lender Koto launches in the UK for left-behind consumers
A challenger lender focused on providing credit to freelancers and self-employed has today launched in the UK following an investment round.
Koto, authorised by the Financial Conduct Authority, has closed a £1.3m funding round which it says it will use to expand and acquire its first 50,000 users.
Kotto hopes to cater to “near prime” borrowers who are typically excluded by the big banks because of inconsistent income. They are usually freelancers and the self employed, are new to credit or the UK, or have a mark against their credit history.
PwC research shows there are between 10m and 14m people in the UK that struggle to access credit from mainstream sources.
Koto’s launch comes at a critical time for “near prime” borrowers left in a precarious position due to the pandemic.
And while the government has extended support for the self-employed, critics say that because the eligibility criteria is unchanged it means as many as 2.9m freelancers, contractors and self-employed people will remain excluded.
The idea for Koto came when founder Misha Rogalskiy, already running a successful firm in Ukraine, was unable to access credit from high street banks.
“I didn’t have a UK credit history the banks could base a decision on,” Rogalskiy said. He hopes to build on the success of his Ukraine-based mobile-only bank Monobank, which boasts more than 2.9m customers.
Following in the footsteps of the digital banks, Koto customers can apply for credit exclusively through the app without relying on paper forms. The lender claims to have customers up and running with its virtual card in less than 10 minutes and have access to credit in under five.
Its Extra offering provides up to £400m of credit for a fixed fee of 20 pence per day while its Spread facility offers up to £1,000 with a fixed cost of £10 a month.
Shoring up its challenger credentials, Koto is the only near-prime credit product that can be added to Apple Pay and Google Pay, as well as offering a spending tracker with alerts.