A Credit Card for Underbanked Customers

Just a few weeks after they raised 13 million dollars led by Valar Ventures, Petal launches a credit card for people without a credit history. This service is meant to address more than 65 million potential borrowers who never subscribed a credit offer. A partnership between WebBank, member of the FDIC, has been announced so that required credit qualification criteria and terms can be assessed.

The service has been developed by Petal, and is currently undergoing a Beta pilot experiment in the US. It comes along a free Visa card, with applied interest rates ranging from 14.5% to 25.5%. Applied credit limits can reach 10,000 dollars.

By way of qualifying applicants’ creditworthiness and their ability to pay back a loan, this FinTech relies on Machine Learning algorithms and Data analytics. Beyond just FICO score, this tool also scrutinises the borrower’s revenue, his day-to-day expenses, as well as his monthly bills.

The credit card which comes along this service is paired with a mobile app, so the user can better manage his expenses. This service is available through a Web interface and via mobile, it provides cardholders with budget analyses, real-time notifications and even financial advice for later purchases.

Comments – Seeing credit scores in a different way

For those with bad credit scores or who do not have credit history at all, being able to subscribe a credit card can often prove difficult, or even impossible. According to a study by Experian in the US, more than 50 million people have a credit score which does not reflect their actual financial situation, or ability to pay back a loan. In fact in some cases, barely enough data is available. According to Andreessen Horowitz, 90 million people could be concerned, or one third of the American borrowers. This considered, new entrants are emerging and trying to remedy this situation. Petal is one of these players hoping to make credit services more accessible and affordable.

This FinTech draws inspiration from other companies including Kabbage and OnDeck, pioneers in developing automated analysis systems applied to faster, near-instant credit granting processes for small e-merchants. The principle here is similar: exploiting Data to propose customised credit offers, only the targeted segment is different. BtoC targets are increasingly addressed by companies, including Pockit, Tanda and Upstart.