With an increase in the use of artificial intelligence and the sharing economy in business, it is easier than ever for people without credit to obtain a credit card. This is especially relevant now since the Consumer Financial Protection Bureau has estimated that 45 million Americans (1 out of every 5 American adults) either lack a credit history altogether or have insufficient history to generate a credit score.
Let me introduce you to Petal. Co-Founder and CEO Jason Gross was struck by the unequal opportunity for people with an underprivileged background to obtain a credit card solely because they never had the chance to build credit growing up, so he created Petal, a no fee credit card which doesn’t require a credit score. Petal has partnered with Visa, providing clients with a secure, reliable company to apply to. Through machine learning, Petal offers credit to consumers through cash flow underwriting. Upon applying to Petal, one must provide access to bank statements so they can analyze your annual income, spending habits and overall financial health. Once applicants are accepted, they have the opportunity to get their own Petal Card with a $500-$10,000 credit limit, no annual fees and an 14.74%-25.74% annual percentage rate (APR).
A Growing Market
Petal is not the only company in the market, however. Many consumer fintech startups, especially credit and debit card companies, have been developing and receiving large sums of funding from VCfirms just within the past couple of years. In addition to targeting people who had less of an opportunity to build credit while they were growing up, such as minorities or immigrants, these companies also target college students and millennials since they are generally tech savvy and more likely to have yet to start building credit due to their age. This new market of credit card companies offering cards to those who have no previous credit was fascinating to me because it completely disrupts the traditional credit card companies since the idea is completely counterintuitive to how credit cards are normally obtained. Two companies that share Petal’s reinventive idea are Deserve and Zero.
Deserve is one card company determined to give credit cards to students by considering a client’s current financial health, education history, future employability, and projected potential earnings. Deserve primarily focuses on student clients, so their most popular card, Deserve Edu Mastercard, has partnered with Amazon and provides each cardholder with an Amazon student account as well as one percent cash-back on all Amazon purchases. Overall, Deserve has three cards for clients to apply to, ranging from a $1,500- $10,000 credit limit, 17.74%-24.74% APR, and up to $39 in annual fees.
Zero is another credit card company that has taken a slightly different approach to a simplifying the credit process. They are a financial technology company that combines the ease of a debit card with the rewards of a credit card. Since they are technically not a credit card, there are no annual fees or interest rates, but they also waive inactivity and overdraft fees.
Other consumer fintech companies, like Greenlight, take a different approach to the credit industry and offer a debit card for children. Parents monitor their children’s saving and spending by controlling the card, but the children have the benefit of semi-independently budgeting their money. Nonetheless, Greenlight has taken advantage of children’s technological skills and used it to help improve their financial health for the future.
Although Petal’s competitors have individually increased financial inclusion, the Petal card has the competitive advantage over other credit card startups because they have a simple card with the largest credit limit and lowest APR in addition to no annual fees. As an entry level credit card for first time cardholders, it is an easy way to start building credit and maintain a high credit score. Even though Petal is the most simple and beneficial option for first time cardholders, Jason Gross feels as if the more competition and opportunities for consumers, the better. “There are a lot of different solutions that can solve a lot of different problems within financial inclusion,” he said. “It may feel that there are a lot of credit card startups, but to me, I think that there aren’t enough.” Gross’s opinion on competition proves how dedicated he is to creating equal opportunity for financial identities for everyone; of course he wants to run a successful business, but is also concerned with fixing the problem as a whole.
Not only is Petal a great real life example of AI and an application of the sharing economy, but they are also motivated for the right reasons and have a great mission. I really enjoyed learning about Petal, and I am looking forward to speaking more about Petal in class on Wednesday!