The U.S. card industry benefited by the vision and chutzpah of some rock stars that made their mark, like Dee Hock (Bank of America), Ken Chenault (Amex), Jim Bailey (Citi), David Nelms (Discover), Earl Isaac (FICO), Jack Dorsey (Square), and Richard Fairbank (Capital One). Nigel Morris, Richard Fairbank’s early partner, would certainly be on that list. That is what makes today’s read so interesting. As Bloomberg reports on his latest interest, LendUp, where Nigel joined the Board of Directors.
The co-founder of Capital One Financial Corp. is betting now’s a good time to lend to the riskiest borrowers.
Nigel Morris, Richard Fairbank’s partner in creating the company that became Capital One, is joining the board of LendUp Global Inc. and boosting his investment in the firm, which uses machine learning to look beyond traditional credit scores in the subprime market.
Personally, I am not very big on booking marginal credit accounts. I’ve worked in and around FICO scores for 40 years and know they are an excellent way to run a credit business. The scoring is predictable, actionable and fair. Some companies know how to use scoring better than others and Capital One is certainly at the top of the list. It will be interesting to watch how Morris’ background will help move LendUp Global from loans to credit cards.
Morris, 59, said he’d been planning to build his own credit-card venture, then met his “philosophical soul mate,” Sasha Orloff, the founder of San Francisco-based LendUp. “This might be a platform we can work with,” Morris remembers thinking at the time. “They’re leveraging state-of-the-art technology, and it felt like a really good”
LendUp, which has made about 5 million loans totaling roughly $1 billion since its founding in 2012, uses an underwriting process that incorporates data such as rent and utility payments to evaluate subprime borrowers. It started out offering short-term loans, often acting as an alternative to payday lenders, and expanded into credit cards last year.
Its two Visa cards feature longer-than-usual grace periods before late fees kick in, and interest rates ranging from about 20 percent to 30 percent on credit lines of as much as $2,000. The card business is growing much faster than the firm’s lending product, according to the company. One of the cards is issued by TAB Bank and the other by Beneficial State Bank.
I move LendUp on my personal watch list from “interesting” to “keep an eye on this company”; this is a good one to follow.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group