This piece is posted at TearSheet and is an overview of a 2016 New York-based fintech startup named Petal, which issues credit cards using alternative methods of credit underwriting and has reported funding above $500 million.
Petal looks at the cash flow of potential borrowers rather than traditional credit scores to assess creditworthiness, targeting underbanked users who lack the formal statistics to prove they will pay back. To date this has been a consumer proposition only.
‘Petal is one of those fintech companies raising lots of money that hasn’t gotten a lot of press. It’s not because the company isn’t interesting — it is doing some really cool things around consumer credit. Petal may not be getting the ink it deserves because the story revolves around financial data. Financial data is definitely valuable — it’s just not sexy. The underwriting machine is the story here and the story now becomes more complicated with news that the firm is going B2B….Petal is a credit card company that uses cashflow information from bank account data to make underwriting decisions. More than 50 million people lack credit scores in the U.S. and by looking at banking history, the firm has found a way to provide access to credit for thin file/no file consumers.’
The new twist is that the company is launching something of a broader offering that can be applied to perhaps a wider variety of credit products, which they call Prism Data.
The article gives an enterprise B2B lead-in but goes on the describe more of a B2C offering description. The idea is to use the platform’s capability to analyze lots of data into a more effective tool to make credit decisions, regardless of the specific product. One could surely see a small business application here. Those interested can browse through the full piece.
‘“Prism Data takes raw data from financial providers and transforms it into useful information that those providers can rely on, giving them greater insight into credit risk, identity, financial status, and more,” said Jason Gross, Petal’s co-founder and CEO, who will assume similar responsibilities at Prism Data. “We believe financial providers need actionable insights — not raw data — to create bold new solutions.”…Banking history is full of messy data. It’s inconsistent and frequently mislabeled and categorized incorrectly. Since launching in 2016, Petal has spent significant time in market cleaning up and restructuring the data so that it can be used to make credit decisions….WebBank was Prism Data’s first client. Managing the Petal Card program, the bank used this data and approach to cash flow to facilitate access to hundreds of millions of dollars of credit to underserved consumers.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group