Building credit score historical past might be troublesome in case you are a shopper that’s having bother gaining access to credit score in the primary place.
Enter TomoCredit, which has developed a bank card targeted on constructing credit score historical past for first-time debtors. The San Francisco-based startup is asserting right now that it has raised $10 million in a Series A funding round co-led by Kapor Capital and KB Investment Inc. (KBIC), a subsidiary of South Korea’s main shopper financial institution. Lewis & Clark Ventures, AME Cloud Ventures, Knollwood Investment Advisory, WTI, Bronze and Square co-founder Sam Wen additionally participated in the Series A financing.
The new capital comes simply over seven months after TomoCredit raised $7 million in seed funding, and brings its complete raised this yr to $17 million. The firm additionally introduced right now it has appointed Ash Gupta, former CRO at American Express, to its board.
TomoCredit co-founder and CEO Kristy Kim got here up with the idea for the corporate after being rejected a number of occasions for an auto mortgage whereas in her early 20s.
Kim, who immigrated to the U.S. from South Korea along with her household as a toddler, was disenchanted that her lack of credit score historical past proved to be such an impediment regardless of the very fact she had a job “and positive cash flow.”
So she teamed up with Dmitry Kashlev, a Russian immigrant, in January of 2019 to create an answer for different foreign-born people and younger adults going through related credit score challenges. That fall, the startup (quick for Tomorrow’s Credit) was accepted into the Barclays Accelerator, powered by Techstars.
The fintech provides a bank card aimed toward serving to first-time debtors construct credit score historical past, primarily based on their money move, fairly than on their FICO or credit score report rankings. Its largest differentiator, believes Kim, is that it has no charges, no APR and no credit score pull. Traditional credit score merchandise rely closely on charges and APR, she stated, whereas TomoCredit makes cash by service provider charges.
TomoCredit is powered by Finicity (which was acquired by Mastercard final yr), and leverages that firm’s knowledge community and open banking expertise in order that it will possibly “securely” entry candidates’ financial institution accounts to acquire monetary knowledge for underwriting functions.
Once authorized, candidates obtain the TomoCredit Mastercard. The purpose is to convey “millions of individuals that lack a credit score into the financial system, allowing a diverse group of consumers the opportunity to better position themselves as qualified candidates for mortgages, auto loans, or other major life purchases,” the corporate stated.
TomoCredit has already pre-approved greater than 300,000 prospects and expects to problem a complete of 500,000 playing cards by yr’s finish, in accordance with Kim.
“We’ve grown 10x this year from the beginning of 2021,” Kim stated. “Still, this round came together earlier than expected.”
Something that has been shocking to Kim is the curiosity from quite a lot of sorts of customers.
“In the beginning, we thought international students and immigrants would be most interested in our product,” she informed TechCrunch. “But after launching, we’ve realized that so many people can benefit — from gig economy workers to YouTubers to any young person who hasn’t had a chance to build credit yet. The market is way bigger than we even realized.”
In early 2022, the corporate plans to roll out the Tomo Black card, a product for a few of its current prospects that “are showing good performance.” It’s at present testing it with a few of its current consumer base.
“This is a premium product that can grow with our customers, who we want to retain over the next 10 to 20 years,” Kim stated. “We don’t want our product to be a stop-gap solution.”
The startup plans to make use of its new capital to do extra hiring and improve options resembling weekly autopay and excessive credit score limits in an effort to “boost credit scores faster,” she added. Currently, TomoCredit has about 30 staff, up from 10 on the time of its final elevate in February.
“My main focus is recruiting top talent,” Kim stated, noting that the corporate had already employed “some senior people from Wells Fargo.”
“When we recruit and hire, we care about diversity,” she added. “We’re building products for people who have been traditionally underserved by major banks. I think to align with our mission, we should embody that in building our team. More than 50% of our execs are female. The entire risk team is female. We are diverse in terms of gender, age and ethnicity because we want to truly understand our customers and build a product that is inclusive.”
Brian Dixon, companion at Kapor Capital, factors out that there are about 45 million individuals in the U.S. who ought to have credit score scores, however can’t take out a mortgage, get a bank card, or apply for a mortgage. And that quantity is barely rising.
“When we learned that Kristy experienced these issues firsthand when she moved to the United States and thoughtfully figured out a way to circumvent the predatory and broken credit card system, it deepened our conviction in her and the product itself,” he wrote through e-mail.
Dixon believes that TomoCredit’s mannequin of not charging the consumer makes it a “safe and affordable alternative” to what’s in the market.
“Their mission aligns with our thesis of closing gaps of access and opportunity in the credit space at large as well,” he added.
#Note-Author Name – Mary Ann Azevedo