Credit card start-up Petal just completed a new financing round.
The New York City-based company announced a $300 million debt round from Jefferies on Tuesday, adding to existing venture capital investments from names like Peter Thiel’s Valar Ventures.
Petal offers a Visa rewards card to people with little to no credit history. Founder and CEO Jason Gross said the idea was to offer younger customers, who often haven’t established credit, a rewards-based card. Instead of using a traditional FICO score, it uses other data and metrics to assess whether or not someone can repay the loans. Companies like Square, Stripe and PayPal are leaning on similar tactics to underwrite small business loans.
“It’s based on cash flow, with a more representative view than a FICO score,” Gross told CNBC in a phone interview. “We can’t approve everyone that applies, but we’re doing highly sophisticated analysis to see their entire financial picture.”
Gross said Petal has doubled its user base every month since launching the card in October. Roughly 65% of its 50,000 customers are millennials or Gen Z, serving a “totally different demographic” than American Express, he said. Petal also incentivizes those younger users to pay on time: Cardholders get 1 percent cash back on every purchase. After six on-time payments, that increases to 1.25%, then 1.5% after 12 payments.
Petal’s financing comes as investors increasingly bet on other credit card start-ups. Mission Lane, another new credit card company run by ex-Barclays U.S. consumer bank chief Shane Holdaway, raised half a billion dollars in debt and equity financing last week. Corporate credit card start-up Brex, another Peter Thiel investment, has climbed to a $2.6 billion valuation after funding rounds this year.