Petal's $200MM debt facility from Victory Park Capital; Scaling Twitter, Bunq, and Goldman Sachs
Lex Sokolin
Managing Partner @Generative Ventures | ex Consensys Chief Economist & CMO | Fintech, AI, Web3
The Fintech Blueprint is a newsletter authored by me, Lex Sokolin, and a small group of brilliant researchers who focus on frontier technologies impacting the future of financial services. I am glad you are here.
Hi Fintech Futurists —?
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Digital Investment & Banking Short Takes
CREDIT: Petal Closes New $200 Million Debt Facility from Victory Park Capital, Raises Additional Debt and Equity Funding (link?here)
Petal has received a $200MM debt facility from alternative asset investment firm Victory Park Capital. It brings Petal’s total fundraised equity capital to $300MM and debt financing to $680MM for its credit card offering that doesn’t require a credit score. This feature is Petal’s key differentiator, dubbed the cash flow underwriting process, which allows users to use their banking history to qualify for credit and start building a credit history. The approach looks to increase access to credit for Americans, particularly those whose credit scores are not representative of their financial situation and those without credit histories. The debt facility is expected to be used to spur growth of Petal’s credit card program, which has 400k customers, 100k of which were approved last year.
Petal’s offering is particularly valuable given that the?rejection rate amongst credit card applicants is the highest since 2018. It increased 21.8% last year, primarily impacting those with scores below 680. The extent of the challenge is highlighted by the Consumer Financial Protection Bureau’s (CFPB) upcoming rules on Dodd-Fraction Section 1033 that look to provide consumers with the ability to share and access cash flow data for credit underwriting purposes. CFPB backed up their ruling with an analysis detailing how cash flow data can be a strong indicator of creditworthiness, allowing for better risk management and greater access to capital. And the proof is in the pudding - 40% of Petal users in the past two years were been first denied credit by a major bank.?
Whilst credit rejection rates are at a 5-year high, and with?incumbents tightening their standards, Petal is making strives towards making traditional credit more accessible. But competition is rife in the credit space and there is a range of models to compete against. Products like BNPL and virtual cards are on the rise, particularly among those who do not want to use credit cards. We agree with novel mechanisms for assessing creditworthiness but the jury is out as to whether credit cards will maintain their prominence or if they are superseded by other credit services with a simpler UX and lower commitment.?
Blueprint Deep Dive
The craft of scaling fintechs beyond their niche -- analyzing Twitter, Bunq, and Goldman Sachs?(link?here)
We want to riff on the underlying drivers behind successful growth and unsuccessful attempts at growth in fintech.
This is in response to seeing the recent raise from Bunq, a profitable European neobank, watching Goldman shut down its consumer ambitions, as well as an interview we had done a few weeks back with Public. The custodian Altruist and lender SoFi also come to mind. Last, we’ll frame the transition of Twitter to X, and why that feels bad to everyone involved.
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Podcast Conversation:?From gift cards to a global payments network of digital value, with Runa CEO Aron Alexander (link?here)
In this conversation, we chat with?Aron Alexander?-?Founder and CEO of the digital value and infrastructure provider Runa.
Aron has been deeply engrossed in the commerce world since his early days spent in his family's retail and grocery stores. This interest would later expand into managing a family office and leading a division at a B2B2C payment company. However, it was an exasperating experience of trying to spend a ￡5 paper voucher received by mail that served as the spark for his entrepreneurial journey.
Rest of the Best
Here are the rest of the updates hitting our radar.
Neobanks
Payments
Digital Investing
AI
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Usury pays! what a surprise
Proudly ??works for Bidfood Christchurch |Territory Sales & Account Mangement| Relationship Builder.
1 年Lex, fascinating update on Petal's growth strategy. Curious about the potential ripple effects in the wider hashtag#fintech landscape.
Your update is incredibly informative and showcases your finger on the pulse of the fintech world.
Helping you make sense of going Cashless | Best-selling author of "Cashless" and "Innovation Lab Excellence" | Consultant | Speaker | Top media source on China's CBDC, the digital yuan | China AI and tech
1 年Great read as always. Loved that you used Clayton Christensen's graph!
Realtor Associate @ Next Trend Realty LLC | HAR REALTOR, IRS Tax Preparer
1 年Thanks for Posting.