Venmo Launches its First Credit Card with Up to 3% Cash Back and Personalized Rewards; Macy's Invests in Klarna; Mastercard Invests in Marqeta

Last week (5-9 October) was yet another interesting week in FinTech this year. PayPal-owned company Venmo is rolling out Venmo Credit Card to select customers. The Visa card offers 3% cash back on eligible purchases, personalized rewards and tools to track and manage finances; iconic department store Macy's has taken a stake in buy now, pay later outfit Klarna, giving the Swedish vendor a huge boost in its bid to crack the US market; Mastercard has backed payments outfit Marqeta, and more!

Without further ado, let us dive into what has happened in the financial technology sector this week. Let’s connect the dots.

Venmo Launches its First Credit Card with Up to 3% Cash Back and Personalized Rewards

P2P payments giant Venmo has launched its first credit card, which comes with a personalised rewards setup and a built in QR code.

PayPal-owned company is rolling out Venmo Credit Card to select customers. The Visa card offers 3% cash back on eligible purchases, personalized rewards and tools to track and manage finances. However, what makes the card potentially appealing to Venmo’s  younger user base is how the card is directly integrated into the Venmo mobile app.

Cardholders will be able to track their spending in real time, organized by category, plus split or share purchases, view their cash back status, make payments and manage their card directly in the Venmo mobile app. They can also opt in to receive real-time alerts when purchases and payments are made, much like other credit card and banking apps allow for today. And they can receive alerts when cash back is applied to their account.

Instead of offering a certain percentage in cash back rewards to all Venmo users by category, for example, or as Apple Card does by vendor (at its top tier), the new Venmo Card rewards system will be personalized.

Users can earn rewards from eight spending categories: Grocery, Bills & Utilities, Health & Beauty, Gas, Entertainment, Dining & Nightlife, Transportation and Travel. Users will earn 3% back on their top spending category, 2% from the second highest category, then 1% on all other purchases, the company says.

That’s a competitive offering compared with other cash back cards, given that the Venmo Card doesn’t include an annual fee. However, the card does charge other typical fees — like for cash advances, late and returned payments and interest. Currently, the APR ranges from 15.25% to 24.24%, based on the account holder’s creditworthiness.

One must note that Venmo already offers a Mastercard-branded debit card for its users — an offering it launched to target is millennial customer base, who tend to avoid credit cards as they’re worried about becoming trapped in the vicious credit-and-debt cycle. However, as many millennials are now finally starting to marry and buy their first homes, they’re coming to realize that establishing credit history matters. But they may still shy away from big banks, preferring alternative credit products, like credit cards that work like debit or perhaps Venmo’s Card, as it’s tied to a money management app they already use and rely on.

Venmo in Q2 said it had more than 60 million active accounts using its payments app — meaning those accounts that had completed a transaction within a 12-month timespan. It declined to say how many have since adopted its debit card to date. The company also reported $37 billion in Venmo payment volume in the most recent quarter. That means Venmo sports a large and active user base that it can upsell the new card to from within its free, peer-to-peer payments app, instead of only relying on external marketing.

As earlier reported, the Venmo Card is issued by Synchrony Bank, which is today known for powering a number of store cards, including those from Amazon,  eBay, JCPenney, TJX, Stein Mart, American Eagle, Gap, Old Navy, Rooms to Go, Lowe’s and many others — around 100 cards, in total. The company has financed more than $149 billion in sales and has 75.5 million active accounts, according to its website.

Neobank Douugh Lists on ASX

Neobank and smart money management app Douugh has begun trading on the Australian Stock Exchange (ASX) after raising $6M in Series A funding.

The company has listed via a reverse takeover of Australian telco ZipTel. In January ZipTel suspended trading on ASX ahead of a March acquisition of Douugh before seeking readmission to the exchange under the new name.

Douugh offers a subscription-based financial wellness platform, which helps customers with money management, paying off debt, saving more each month, and building up their wealth by using a 'smart' bank account and Mastercard debit card.

The app has been in beta with US customers since the middle of last year thanks to a partnership with Choice Bank. The firm has also inked a deal with Regional Australia Bank ahead of an Oz launch.

Douugh CEO Andy Taylor claims that working with established lenders enables his firm to build the next generation of neobank, that "can offer a government-insured bank account and debit card just like a first-generation neobank, without the high cost structure, clunky business model and risk profile of becoming a licensed bank".

Taylor added:

We will use our IPO funds to scale up our US customer base and continue to invest heavily in R&D to improve our AI-driven banking platform.

Macy's Invests in Klarna

Iconic department store Macy's has taken a stake in buy now, pay later outfit Klarna, giving the Swedish vendor a huge boost in its bid to crack the US market.

Macy's is rolling out Klarna's technology to offer customers the ability to elect to pay in four equal, interest-free installments at online checkout. The deal terms include a five-year exclusivity clause, giving Klarna a free run at embedding its brand in the minds of consumers.

“Macy’s continually seeks strategic partnerships that enable us to provide our customers with the best possible shopping experience,” said Matt Baer, chief digital officer, Macy’s, Inc. “We’re excited to embark on a long-term relationship with Klarna that will help us reach wider audiences looking for seamless alternative payment solutions that provide them with financial control and convenience.”

Macy's interest comes just six week after Klarna raised $650 million as part of a a renewed effort to break into the United States, where the company now claims more than 9 million consumers..

The value of Macy's investment in Klarna was not disclosed.

Petal Launches Credit Card for People with Poor Credit

US FinTech startup Petal has unveiled a credit card designed for people with non-prime credit scores in the wake of the Covid-19 crisis.

Petal 1 is the firm's second credit card. Like the first, it is a no-annual fee Visa card paired with a mobile app. However, while the first card - now called Petal 2 - focused on those with no or thin credit histories, the new card is aimed at a wider audience: people who already have a history that is fair or poor.

Petal - which recently raised $55 million in funding - says that nearly half of all Americans have a non-prime credit score and this is likely to increase with the fallout from Covid-19. At the same time, issuers are issuing fewer cards during the pandemic.

Rather than relying solely on credit scores, Petal has built proprietary technology that analyses banking history — measuring creditworthiness based on income, spending, and savings.

The process, referred to as “Cash Scoring”, measures economic fundamentals that aren’t typically considered in a credit approval decision, helping people that traditionally have trouble getting credit.

The new card is designed to help users build their credit, with an app that gives members access to credit score tracking, budgeting tools, subscription management, and automated payment options. Users can then graduate to the Petal 2.

Mastercard Invests in Marqeta

Mastercard has invested in open API card issuing and processing platform Marqeta as part of a wider deal that will see the pair partner in a host of new geographies, beginning with Asia Pacific.

The investment - the size of which was not disclosed - sees Mastercard join rival Visa among Marqeta's backers.

The move also comes on the heels of a $150 million funding round valuing the startup at $4.3 billion, as well as speculation about an imminent IPO.

Mastercard and Marqeta have been working together since 2014, helping fintechs, digital banks and commerce players across North America and Europe bring their card products and programmes to market.

Now, Mastercard will help expedite Marqeta’s international expansion by streamlining its global network certification process, which governs which providers are allowed to process payments internationally through the card giant's network.

"Mastercard’s investment in Marqeta is a significant validation of the power of modern card issuing and the strength of our technology, and their global presence and expertise makes them an invaluable partner,” says Jason Gardner, CEO, Marqeta.

Continue reading on other top stories and get the Weekly FinTech Digest to your inbox every Friday by subscribing to Connecting the Dots Newsletter.

Week in Brief

P2P payments giant Venmo has launched its first credit card, which comes with a personalised rewards setup and a built in QR code.

Neobank and smart money management app Douugh has begun trading on the Australian Stock Exchange (ASX) after raising $6M in Series A funding.

Iconic department store Macy's has taken a stake in buy now, pay later outfit Klarna, giving the Swedish vendor a huge boost in its bid to crack the US market.

US FinTech startup Petal has unveiled a credit card designed for people with non-prime credit scores in the wake of the Covid-19 crisis.

Mastercard has invested in open API card issuing and processing platform Marqeta as part of a wider deal that will see the pair partner in a host of new geographies, beginning with Asia Pacific.

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About: I am a business developer, sales professional, FinTech strategist, as well as Cryptocurrency and Blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at a global payments startup where I'm leading company's expansion into Europe , I'm an active member of FinTech community and a TechFin evangelist.

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