Why did we invest in Nemuru?
The policy of keeping interest rates low, which has been pursued for several years now, has forced banks to explore different ways of adapting to existing circumstances. One way banks have found to do this is to step up their consumer lending activity, in pursuit of higher yields.
Nemuru was created specifically to capitalise on this trend and build a premium user experience throughout the lending process. Incubated and partly owned by Antai (one of the leading Venture Builders in Europe, in which InnoCells has been investing since 2018), it draws inspiration from the business model of US company GreenSky — an online POS financing player that eventually became a unicorn (raising >$600m in capital), with the support of major investors such as QED Investors, TPG Capital and DST Global — and it is currently listed on NASDAQ.
The platform allows its merchants to offer loans to customers at point of sale (POS) terminals (B2B2C model) with a fully digital UX (thus removing the challenges commonly associated with more traditional models). We like to describe Nemuru as a blend between a tech company and a loan broker (rather than a balance sheet lender): it originates the loan in real time, but it is the lenders who have registered on the platform that actually grant the loan. It is worth highlighting that, just like GreenSky, in its early days, Nemuru’s activity mainly targeted the reforms sector, as the essential core of its value proposition.
For InnoCells, its top-class team has been a decisive factor in our decision to invest, along with its high level of expertise in the financial sector and its experience in growing tech companies. Pere Monràs, co-founder and CEO of the company, has more than 7 years’ experience working in strategic consulting, focusing particularly on digital transformation and fintech initiatives. By his side are Enric Gilabert (CPO), who has previously spearheaded banking transformation projects and has a background in technology and data, and Natalia Piccinin (CTO), who has extensive experience working in the risk departments of banks and fintech companies.
Although the emergence of new players in the consumer lending segment threatened to put a ‘blue ocean’ beyond its reach, Nemuru was able to adopt a different strategy that ultimately enables it to attain a privileged position: it resolved to focus on offline POS finance, covering a range of medium-high ticket transactions (around €5,000) supported by a multi-lender model. We believe that incorporating all three players into the equation will create a virtuous cycle between the parties that will ensure greater engagement, scalability (organic referrals) and create value for those players:
A) Lenders: it enables the construction of an additional distribution channel (lean integration via API and automated lending processes), in addition to an ad-hoc portfolio based on the risk profile of the lender and other preferences (loan amount, sectoral exposure, etc.).
B) Merchants: at a business level, the possibility of offering finance increases transaction volumes and enables the generation of bigger-ticket transactions. Moreover, Nemuru eliminates operating costs and improves merchants’ working capital position, thus helping them to improve their financial wellbeing.
C): End customer: the speed of the mobile loan application process (application, underwriting and approval) is not the only advantage for customers. The large pool of lenders operating on the platform translates into a higher percentage of loan approvals and more attractive terms for customers.
In the same vein, another factor that inspires a lot of confidence is the professionalism and expertise demonstrated by the team when it comes to understanding the behaviour of the two players involved, which comes into play through an ongoing process of testing, identifying errors and making granular measurements of their purchase funnel (merchants) and conversion funnel (lenders).
At InnoCells, in addition to the financial return implicit in our investment, we are already reaping the strategic benefit, as we are now collaborating with Sabadell Consumer Finance, which acts as a lender on the platform. Nemuru has therefore become an additional distribution channel for the bank, one that helps give our customers a better experience overall, whilst also opening up a window of opportunity for the cross-selling of financial products within Open Banking. The investment complements our 2018 acquisition of Instant Credit (online POS finance), putting our offline POS finance on an equal footing and allowing us to cover transactions with a larger average ticket size.
Over the past few months, this startup from Barcelona has shown itself to be resilient to the new challenges arising from the Covid-19 crisis, as it has successfully reinvented itself by opening new revenue lines — sale of their credit scoring model — and by opening itself up to new business verticals other than reforms (education, auto, travel, etc.).
As part of our ongoing effort to contribute value to our investees, at InnoCells we will be supporting Nemuru in its international expansion towards new markets and in the diversification and expansion of its pool of lenders, which is a key component of the company’s business model. We will also be by its side as it explores the world of funding sources that are not strictly banking-related (e.g. pension funds, insurers, etc.) so as to ensure its medium and long-term operational success.
