Ali Heron, head of engineering at Petal, joined us last week at our virtual Convergence Conference 2021. Heron talked about Petal’s mission to democratize credit for the underserved and underbanked by launching products and associated features.
Heron says that about 150 million Americans today are shut out of mainstream credit. 50 million American adults don’t have a credit score at all, and tens of millions either have limited credit data or their score is inaccurate. Moreover, both black and Hispanic consumers are two times more likely to lack a credit score, and young people are at a systematic advantage because ‘it takes credit to build credit.’
What is Petal?
Petal is a credit card company that helps consumers build credit by looking at their creditworthiness through a different lens -- chiefly through banking history. Instead of using traditional credit scores, Petal uses its proprietary cashflow underwriting technology, Cash Score, to evaluate a consumer’s income, assets, savings, transaction history, and financial volatility, to make underwriting decisions.
“Our mission at Petal is to expand access to opportunity with modern and responsible financial services for everyone,” said Heron.
So far, Petal has two products, both of which are credit cards targeting two different demographics.
Petal 1 has a credit limit that begins with $500 and caps at $5,000, with APRs between 19.99% - 29.49%. The card also offers cashback rewards between 2% - 10% at select merchants. There are no annual or international fees. Heron says the Petal 1 card is a builder card, designed to help consumers onboarding the financial system, typically young consumers with thin or no credit history who are learning to ‘adult’.
Petal 2 has a credit limit range between $500 and $10,000, with APRs between 12.99% - 26.99%. Like Petal 1, the card offers cashback rewards between 2% - 10% at select merchants, but it also provides 1% cashback right away, with a chance to earn up to 1.5% when consumers pay on time. There are no annual, international, late or returned payment fees. Petal 2 is for older consumers who are already in the system and want to improve their credit scores.
“The second category is the rebuilder. They’ve frankly been burnt by this system. They skew older, they usually have a thick credit history or mid-career, and have just gotten themselves into trouble with debt previously,” says Heron. “We're able to service these customers where others don't, because of the cash flow underwriting and how we're able to kind of see a 360-degree view of our customers.”
In addition to the credit cards, Petal also offers an app that customers can link to their Petal card and most other financial institutions. The Petal app is designed to help customers become more financially responsible with their money and credit through a range of features. To begin with, customers are able to keep track of their credit scores within the app. The app also features a payments calculator that calculates how much interest customers will owe based on what they can pay.
Other features include:
- Leap - Petal customers can earn a credit limit increase or more cashback when they make on-time payments for six months in a row and keep their credit score within a personalized range.
- Spend planner - this feature allows customers to set a personalized budget lower than their credit limit to see how they’re spending against it.
- Insights - Insights allows customers to track spending across categories over time. It’s composed of three widgets called Spend Chart, Top Merchants, and Top Categories. With Spend Chart, members can more easily track the total amount they spent each month over time. With the other two widgets, members are able to see the merchants and spend categories they spent at most in a given month.
- Subscription management - Petal automatically highlights popular subscriptions being charged to the customer’s Petal Card and shows customers how to cancel unnecessary subscriptions.
Petal also launched a sister company of sorts earlier this year called Prism Data, a B2B API that allows other businesses and verticals to access Cash Score to help them make better decisions.
With four products in three years, Petal has so far managed to balance its growth and innovation. Heron says that technology is changing very quickly in the industry but she’s a big advocate for slowing down and letting others test the changes and experience the pitfalls ahead of her and her team.
“I think there are places where we've been able to move quickly and have the advantage of being a startup,” says Heron. “But then they're also places where we've had to move slowly to get it right...sometimes you have to move slow to go fast.”