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Traditional approaches to credit scoring mean that millions of working South Africans are denied fair access to vehicle financing – in turn, depriving them of the economic and lifestyle benefits of owning a car in a country with underdeveloped public transport. Flexible car subscription models that leverage digital platforms and sophisticated algorithms are rapidly changing that picture.

That’s according to Eerik Oja, CEO and co-founder of car subscription platform Planet42. He says that South Africa’s patterns of transport inequality are perpetuated by the reluctance of South African banks to provide car loans to people with poor credit scores. The result is that millions of people need to rely on an underdeveloped, inflexible and expensive public transport network to get around.

It is estimated that as much as two thirds of working South Africans cannot qualify for a car loan because they are blacklisted or have low credit scores, says Oja. “It cannot be right that so many people with stable incomes are excluded from the economic mobility opportunities of owning a car because they once paid their cellphone or clothing account a bit late.”

A fairer approach to credit risk

Planet42—which offers an inclusive used car subscription service to customers who typically cannot access traditional bank credit—has taken an alternate view on risk. The company has invested in a cutting-edge data platform and analytics capabilities to assess the creditworthiness of its customers in a fairer and more accurate way.

Starting with the same credit bureau data as the banks use, the company uses its algorithm to analyse thousands of data points about each customer and assess credit risk. As data about the payment discipline of its customer base grows in volume, Planet42 is able to identify good and poor credit risks with more accuracy.

The company’s proprietary scoring algorithms instantly assess a customer’s affordability and offers them used cars from a growing list of local dealers located country-wide. Planet42 then buys the car and rents it to the customer on a flexible subscription basis. Customers also have the option to eventually buy their vehicle.

Getting better and better all the time

Planet42 has evolved its algorithms eight times over the past three years, based on what it has learned as the dataset has grown, says Oja. “Over time, we are making better and better customer risk decisions,” he adds. “Our use of algorithms has enabled us to eliminate human bias from credit decisions and achieve efficiencies through automation.

“The algorithm makes the initial decisions and high-probability events are passed to back-office staff for verification. Within 60 seconds, our algorithm can give the customer a response. Using this approach, we processed 55,000 applications in January with only 10 people in the back office. And through this process, we don’t need to see the customer or the car.”

Planet42 is competing in a fast-growing market that has seen the emergence of other car subscription and car leasing start-ups. However, Planet42’s focus on people who are excluded from car loans means that it doesn’t compete directly with most of those companies. The company aims to have 1% of the used vehicle market in South Africa over the next three to four years, which translates to 100,000 vehicles.

Planet42 is also targeting international expansion. The company recently bought its first cars for clients in Mexico, a country of 128 million people with similar transport inequality challenges to South Africa.