24 February 2018
visit www.ebaday.com

Petal raises $13m for credit card aimed at people without credit history

10 January 2018  |  7246 views  |  0 credit card

Petal, a US credit card startup that is ditching traditional credit scores in an effort to sign up young people and the underbanked, has raised $13 million in a Series A funding round led by Peter Thiel's Valar Ventures.

Petal says that decades-old traditional credit scoring methods put lower-income consumers, immigrants and people of colour in a Catch-22 situation - they can’t get access to credit without a credit history, and they can’t build a credit history without access to credit.

What's more, data from Experian shows that the average American under 35 has a score that is considered by banks as "high risk" or "subprime" - making the whole system unfit for purpose.

In response, the startup has developed an alternative, which it calls 'Cashflow Underwriting', that uses machine learning and "common sense" to analyses, in real-time, an individual’s digital financial record, measuring objective components of their creditworthiness, like how much they make, save and spend over time, and the bills they pay each month.

This, says Petal, gives it a more accurate and precise understanding of how much someone can safely afford to borrow, and can identify consumers who are a good credit risk without having to rely solely on credit history.

"Something is terribly wrong when the industry decides an entire generation is, on average, subprime,” says Jason Gross, CEO, Petal. "Today’s credit system unfairly labels young Americans and other new-to-credit borrowers as ‘high-risk’, then punishes them with high interest rates and excessive fees. Petal breaks that cycle, using technology to give tens of millions of people the credit they deserve."

In September, the firm unveiled its no-fee credit card, along with a mobile app to help users own and manage it.

The new funding will be used to expand Petal's team and roll out the card to a waiting list of "thousands". With a team already including veterans from the likes of JPMorgan Chase, Capital One, AmEx and PayPal, the firm has also recently hired the senior counsel in the CFPB’s Office of Regulations, Shiri Wolf, as general counsel.

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Baidu partners ZestFinance to turn search data into credit scores

Baidu partners ZestFinance to turn search data into credit scores

18 July 2016  |  6066 views  |  1 comments | 4 tweets | 7 linkedin
Alternative lender SoFi becomes Fico-free zone

Alternative lender SoFi becomes Fico-free zone

12 January 2016  |  6388 views  |  3 comments | 9 tweets | 6 linkedin
Wells Fargo launches credit score advice sites

Wells Fargo launches credit score advice sites

25 February 2015  |  5715 views  |  0 comments | 3 tweets | 4 linkedin

Related blogs

Create a blog about this story (membership required)
visit www.nextgenbanking.co.ukVisit https://www.capgemini.comvisit www.swift.com/your-needs/instant-payments

Top topics

Most viewed Most shared
Ripple makes new connections to emerging marketsRipple makes new connections to emerging m...
11792 views comments | 16 tweets | 10 linkedin
hands typing furiouslySome Interesting Applications Of The Inter...
10325 views 3 | 9 tweets | 1 linkedin
Basel Committee outlines disruptive fintech scenariosBasel Committee outlines disruptive fintec...
8568 views comments | 15 tweets | 26 linkedin
Investment Association sets up fintech accelerator for asset managersInvestment Association sets up fintech acc...
8090 views comments | 19 tweets | 10 linkedin
R3 creates Legal Centre of Excellence for blockchain technolgyR3 creates Legal Centre of Excellence for...
7774 views comments | 10 tweets | 14 linkedin

Featured job

Basic c.£90K OTE c.£180K plus full benefits pac...
London based

Find your next job