Petal, a fintech company that aims to provide credit cards to young people and others who lack a credit history, has raised $13 million; it has said on Wednesday.
The US credit card startup is abandoning traditional credit scoring in favour of ‘Cashflow Underwriting’, which uses machine learning and “common sense” to analyze, in real-time, an individual’s digital financial record. The use of non-traditional data intergrates the underbanked — millennials, immigrants and other consumers who are typically shut out from credit lending facilities by banks and lenders because of their limited credit histories. Petal also evaluates their aspects of their monthly cash flow such as rent paid, bills, groceries and savings. According to the company, this gives them 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.
The new funding will be used to expand Petal’s team, which already consists of veterans from the likes of JPMorgan Chase, Capital One, AmEx, PayPal and the CFPB’s Office of Regulations. The new burst of funding will also help roll out the card to a waiting list consisting of “thousands”. The zero-fee credit card is will offer interest rates between 13.99% on 24.99% on credit limits ranging from USD 500-10,000. The company is also expected to supplement it’s income with card swipe fees borne by retailers.
To read more on Petal’s press release, click here.