Building a credit history can be difficult if you are a consumer who has trouble accessing credit in the first place.
Pay in TomoCredit, which has developed a credit card focused on building a credit history for first-time borrowers. The San Francisco-based startup announces today 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 leading consumer bank. Lewis & Clark Ventures, AME Cloud Ventures, Knollwood Investment Advisory, WTI, Bronze and Square Co-Founder Sam Wen also participated in Series A financing.
The new capital comes just over seven months after TomoCredit raised $ 7 million in seed funding and brings the total raised this year to $ 17 million. The company also announced today that it has named Ash Gupta, former CRO of American Express, to its board of directors.
TomoCredit co-founder and CEO Kristy Kim came up with the concept for the company after being turned down multiple times for a car loan in her early 20s.
Kim, who immigrated to the US from South Korea with her family as a child, was disappointed that her lack of credit proved to be an obstacle despite having a job “and positive cash flow.”
So he partnered with Dmitry Kashlev, a Russian immigrant, in January 2019 to create a solution for other foreign-born and young adults facing similar credit challenges. That fall, the startup (short for Tomorrow’s Credit) was accepted into Barclays Accelerator, powered by Techstars.
The fintech offers a credit card aimed at helping first-time borrowers build a credit history, based on their cash flow, rather than their FICO or credit report scores. Its biggest differentiator, Kim believes, is that it has no fees, no APRs, and no credit pull. Traditional credit products are heavily dependent on fees and APR, he said, while TomoCredit makes money through commercial fees.
TomoCredit works with Finicity (which was acquired by Mastercard last year) and leverages that company’s data network and open banking technology so that you can “securely” access applicants’ bank accounts to obtain financial data with subscription purposes.
Once approved, applicants receive the TomoCredit Mastercard. The goal is to bring “millions of people who lack credit scores 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,” he said the company. .
TomoCredit has already pre-approved more than 300,000 clients and expects to issue a total of 500,000 cards by the end of the year, according to Kim.
“We have grown 10 times this year since early 2021,” Kim said. “Still, this round came earlier than expected.”
Something that has surprised Kim is the interest of a variety of consumer types.
“At first, we thought international students and immigrants would be more interested in our product,” he told TechCrunch. “But after the launch, we realized that many people can benefit, from workers in the gig economy to YouTubers and any young people who have not yet had a chance to build credit. The market is much bigger than we think ”.
In early 2022, the company plans to launch the Tomo Black card, a product for some of its existing customers that “are showing good performance.” You are currently testing it with some of your existing users.
“This is a premium product that can grow with our customers, whom we want to retain for the next 10 to 20 years,” said Kim. “We don’t want our product to be a stopgap solution. “
The startup plans to use its new capital to make more hires and improve features such as weekly automatic payments and high credit limits in an effort to “raise credit ratings faster,” he added. TomoCredit currently has around 30 employees, up from 10 at the time of its last increase in February.
“SUBWAY“The main focus is recruiting the best talent,” Kim said, noting that the company had already hired “some high-level people from Wells Fargo.”
“When we recruit and hire, we care about diversity,” he added. “We are creating products for people who have traditionally been underserved by big banks. I think to align with our mission, we should incorporate that when building our team. More than 50% of our executives are women. 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 create a product that is inclusive. “
Brian Dixon, a partner at Kapor Capital, notes that there are There are approximately 45 million people in the US who should have credit scores, but cannot get a loan, get a credit card, or apply for a mortgage. And that number is only increasing.
“When we learned that Kristy experienced these issues first-hand when she moved to the United States and thought carefully of a way to circumvent the broken and predatory credit card system, it deepened our conviction about her and the product itself,” wrote by email.
Dixon believes that TomoCredit’s model of not charging the user makes it a “safe and affordable alternative ”to what is on the market.
“Its mission is also aligned with our thesis of closing access gaps and opportunities in the credit space in general,” he added.