It can be difficult to build a credit history if you are a consumer who has difficulty accessing credit in the first place.
Enter TomoCredit, which developed a credit card focused on building a credit history for first time borrowers. The San Francisco-based startup today announced 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, co-founder of Bronze and Square Sam Wen also participated in the financing of Series A.
The new capital comes just over seven months after TomoCredit raised $ 7 million in seed funding, and brings its total raised this year to $ 17 million. The company also announced today that it has appointed Ash Gupta, former CRO of American Express, to its board of directors.
TomoCredit co-founder and CEO Kristy Kim came up with the business concept after she was repeatedly turned down for a car loan when she was in her early 20s.
Kim, who immigrated to the United States from South Korea with her family as a child, was disappointed that her lack of credit history turned out to be such a hindrance despite having a job. “and a positive cash flow”.
So she teamed up with Dmitry Kashlev, a Russian immigrant, in January 2019 to create a solution for other foreign-born people and young adults facing similar credit problems. That fall, the startup (short for Tomorrow’s Credit) was accepted into the Barclays Accelerator, powered by Techstars.
Fintech offers a credit card aimed at helping first-time borrowers build a credit history, based on their cash flow, rather than their FICO score or credit report. Its biggest differentiator, Kim believes, is that it has no fees, no APRs, and no credit. Traditional credit products rely heavily on fees and APR, she said, while TomoCredit makes money from merchant fees.
TomoCredit is powered by Finicity (which was acquired by Mastercard last year) and leverages that company’s data network and open banking technology so that it can ‘securely’ access applicants’ bank accounts for credit. financial data for underwriting purposes.
Once approved, candidates receive the TomoCredit Mastercard. The goal is to bring “millions of people who have no credit score into the financial system, enabling a diverse group of consumers to better position themselves as qualified applicants for mortgages, auto loans. or other major purchases, ”the company said. .
TomoCredit has already pre-approved more than 300,000 customers and plans to issue a total of 500,000 cards by the end of the year, according to Kim.
“We’ve increased 10 times this year since the start of 2021,” Kim said. “Nonetheless, this round went ahead ahead of schedule.”
Something that has been surprising to Kim is the interest of a variety of types of consumers.
“At first, we thought international students and immigrants would be most interested in our product,” she told TechCrunch. “But after the launch, we realized that so many people can benefit from it – from gig economy workers to YouTubers to any youngster who hasn’t had a chance to build credit yet. The market is much bigger than we even thought. “
In early 2022, the company plans to roll out the Tomo Black card, a product for some of its existing customers who are “performing well”. It is currently testing it with some of its existing user base.
“This is a high-end product that can grow with our customers, which we aim to keep over the next 10 to 20 years,” Kim said. “We don’t want our product to be a stopgap.
The start-up plans to use its new capital to hire more and improve features like weekly automatic payment and high credit limits with the aim of “boosting credit scores faster,” she added. . Currently, TomoCredit has around 30 employees, up from 10 when it was last increased in February.
“MYour main goal is to recruit the best talent, ”Kim said, noting that the company has already hired“ senior executives from Wells Fargo ”.
“When we recruit and hire, we care about diversity,” she added. “We design products for people traditionally underserved by big banks. I think that to align with our mission, we should embody it in our team building. Over 50% of our executives are women. The entire risk team is female. We are diverse in terms of gender, age and ethnicity because we really want to understand our customers and create an inclusive product. “
Brian Dixon, partner at Kapor Capital, points out that there are There are an estimated 45 million people in the United States who are expected to have a credit score, but cannot take out a loan, get a credit card, or apply for a mortgage. And that number is only increasing.
“When we learned that Kristy had personally experienced these issues when she moved to the United States and that she wisely found a way around the predatory and broken credit card system, it strengthened our belief in her and the product itself, ”he wrote via email.
Dixon believes that TomoCredit’s model of not charging the user makes it a “safe and affordable alternative ”to what’s on the market.
“Their mission aligns with our thesis of filling the gaps in access and opportunities in the credit space in general,” he added.