For the 47 percent of Americans with prime credit scores getting and using a credit card isnt much of a problem The problem Petal co-founder and CEO Jason Gross told Karen Webster is that it leaves around half of all Americans with only a few options a credit card with expensive strings or no credit at all Petal wants to change the math on how consumers gain access to credit and turn the tables on how creditworthiness is assessed What Powers Petal According to Gross the Petal product is designed differently from the ground up Instead of looking at the traditional credit score which he notes is backward-looking and also a static itemized list of what a customer has already done rather a prediction of what they will do Petal plugs into a consumers bank account and looks at their monthly cash flow In addition Petal looks at such information as where the funds go whether they save money and even how they save money One of the interesting things we learned if you take two customers who save an identical amount each year but one puts a consistent amount of money away each month and the other just saves whatever they dont spend the customer on the regular savings plan ends up doing better as a financial manager in the long run said Gross Using their technology to analyze that kind of data Gross noted means they will be able to accept more customers and in general offer higher credit limits to customers up to 10 000 because they have a much clearer picture of what they can afford And while they will charge interest as interest and interchange are their sources of funding they will not charge fees for failing to manage an account well as that would make their customers failure their win said Gross Instead he noted the tool is designed without fees with a goal of making customers more likely to pay and pay on time by helping to educate them about how to be better financial managers on the whole At a basic level that meant designing their app around an entirely mobile-first experience to maximize accessibility for the millennial consumer group who they forecasted would be among its heaviest users At a more intricate level it meant using that mobile technology to give customers greater transparency into their financial lives We are building a value-based business with a mission to make our customers lives easier with honest and easily accessible financial services products said Gross That means for example when a customer is scheduling a payment the app tells them in terms of dollars and cents what making a minimum payment on the card will cost them in interest over the next payment period so they can understand exactly what it costs to borrow that sum of money for that period of time Showing a customer an APR he noted doesnt really tell them the true cost of borrowing money and even a detail that small can greatly change how consumers orient their financial decisions around paying on their cards Particularly among the user segments Petal targets with its services Who Petal Serves Some of Petals user groups Gross noted were expected when they were first designing the product and signing up the 60 000-person waitlist for the Visa-branded card that will be going out over the next 12 months The groups included those new to using credit people new to the US market older consumers who had paid off a mortgage and let their credit profile go a bit stale and returning members of the US military whose credit went dormant during their service period There have however been some surprises Weve actually seen a totally different segment appearing on the waitlist these are people who already have access to credit have other cards in their wallet but who are looking for a different experience with their providers he said There are folks who respond to our companys promise to treat the customer a bit better and help them make better choices There is also a huge opportunity in what Webster and Gross called the second chances market As the PYMNTS Financial Invisibles report indicated once damage has been done to a report bouncing back can be a huge challenge And bouncing back is something lots of good customers have to do Gross noted Life happens to people in a lot of ways and the credit markets tend to punish people for those types of events for a long long time I think one of the great promises of more fair and accurate underwriting is bringing people back into the markets that have had an issue he said Negative information stays on a credit report for at least seven years and in an era where income volatility is higher than ever before that means more people are going to have bad news credit stories following them around for a long time Dings on a credit report Gross noted can occur for a lot of reasons a death in the family disease unexpected emergency divorce A lot of financial catastrophes are brought on by bad decision-making he pointed out but an awful lot are also built on bad luck that was well out of the consumers control And for that customer that has gotten back on their feet and have the ability to pay on their obligations and are demonstrating that by paying their bills and saving accordingly That person should be able to qualify for a safe and affordable credit product Today they mostly cant but in the world of Petals newly released product with WebBank it is their sincere hope that availability becomes a more regular part of the financial system and soon The Long March After what Gross described as a long wait the tens of thousands that have signed up for Petals Visa cards will start getting their invitations to apply over the next few weeks and the cards themselves will start shipping out shortly thereafter Its been a journey particularly on the compliance side as offering a brand-new credit product to underserved consumers using a new underwriting model is generally something regulators want to hear more about Before we ever sought a dime of angel investment dollars we were talking to financial regulators in DC about their vision Gross noted And on the whole they found regulators to be good partners in this quest because at the end of the day they have an aligned mission greater financial access for all Access that can be successfully leveraged into a consumer life Our approach to transparency and responsible credit is well-aligned with policy makers Gross said We want to make sure customers have a clear and unambiguous understanding of how the product works You Might Also Like