‘Financial providers need actionable insights, not raw data’: Credit card company Petal spins off B2B data unit, Prism Data
- Petal is a fast growing credit card company that uses bank history, not traditional credit scores, to make underwriting decisions.
- The company is spinning off its technology to serve other players in the industry.
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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.
Today, the firm is launching its first B2B enterprise product, Prism Data, to make Petal’s transaction intelligence platform — and cash flow based underwriting technology — available to the broader market via an API.
"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.
Prism Data is launching with four products. In addition to Categories, Income, and Insights, the spinoff is making its CashScore available to clients. Using millions of data points, the CashScore incorporates Petal’s learnings about consumer cash flow underwriting and how to transform a consumer's banking history into an accurate assessment of credit risk.
Traditional credit scoring struggled to keep up with the pace of how quickly the economy was deteriorating at the start of the pandemic. Thin-file customers underwritten using the CashScore demonstrate credit performance equivalent to those with FICO scores of 700, according to the company. And when there is a full credit file available, the firm claims CashScore provides an incremental view of risk, improving loss rates by up to 35%.
It isn't uncommon for a B2C firm focused on consumer finance to move into helping FIs do the same. Fintechs Upstart and OakNorth provide credit decisioning tools to lenders. Both built their software and tools for use in-house before pivoting to the enterprise, much like Petal is doing with Prism Data. Selling software to banks and non-bank lenders is a different business than managing loan books, but both have told Tearsheet over the years that the internal build was instrumental in squeezing out the intelligence in the product and understanding the needs of the market.
Petal recently added Brian Duke to a newly created position of vp of data science across Petal and Prism Data, and reporting into Petal Chief Risk Officer, Manik Chawla. Duke was most recently senior director of fraud analytics at Experian, and has experience building sophisticated fraud and credit models with Accenture, SAS, FICO, and Capital One.
As technology matures and financial data becomes more shareable, consumers should gain access to new tools, products, and platforms across the financial industry. "As open banking accelerates, the use of comprehensive, real-time financial data has the potential to change the way consumer finance works — not just in credit, but in payments, banking, insurance, real estate, financial advising, and more," Gross wrote in a post on Medium.