Petal Raises $140M to Disrupt Traditional Credit

A Surge in Accessible Credit: Petal Secures $140 Million

The landscape of consumer credit is evolving, with an increasing number of startups focused on expanding access for a wider range of individuals.

Petal's Series D Funding

Petal, a prominent player in this movement, has recently announced the successful completion of a $140 million Series D funding round.

This new investment brings the company’s valuation to $800 million, representing a significant increase – more than tripling its previous valuation of $55 million from a Series C round in September 2020.

Company Overview and Mission

Established in 2016 and headquartered in New York, Petal provides two Visa credit card products specifically designed for consumers who have limited or no established credit history.

The startup’s core objective is to facilitate credit building, rather than debt accumulation, by basing credit decisions on an individual’s cash flow instead of traditional credit scores. Similar approaches are utilized by companies like TomoCredit.

Growth and User Base

Petal has experienced substantial growth in the past year, tripling its user base and increasing revenue from $11 million to almost $50 million.

Currently, there are nearly 300,000 Petal cardholders, referred to as “members” by the company.

The company is consistently adding between 10,000 and 20,000 new members each month, according to Jason Gross, Petal’s co-founder and CEO.

CashScoring Technology and Accessibility

Petal initially operated in stealth mode before launching its first product and securing initial funding in September 2017.

The company’s technology analyzes banking history to assess creditworthiness, considering factors like income, spending habits, and savings.

This process, known as “CashScoring,” aims to make credit more accessible to individuals who may not qualify under traditional scoring methods, tailoring terms to each person’s unique financial circumstances.

Impact on Credit Scores

A significant portion of Petal members had limited or no credit history when they initially applied for a card.

Over 40% of new members approved for a Petal card in 2021 had previously been denied credit by major banks.

Members who started with no prior credit history have achieved an average credit score of 676, qualifying them for loans and mortgages.

Expansion into B2B Services: Prism Data

In 2021, Petal expanded its CashScore technology into a B2B enterprise service called Prism Data.

This platform enables other fintech companies and financial institutions to leverage Petal’s CashScoring technology to enhance their own businesses.

Prism Data is described as a “next-generation data intelligence platform” that translates transaction data into actionable insights and scores.

Leadership and Team Growth

Erin Allard, formerly with Bloom Credit, Green Dot, and The Bancorp, has been appointed as the general manager of the company and will lead Prism Data.

Petal has more than doubled its workforce in the last year, now employing over 160 individuals.

The Future of Credit Assessment

Jason Gross emphasizes that Prism Data is built on the belief that open banking and access to consumer-permissioned data will fundamentally alter consumer finance.

He envisions a future where credit scores will be comprehensive, real-time assessments of a consumer’s financial position, encompassing income, cash flow, and assets, alongside debt and repayment history.

Investment Details

Tarsadia Investments spearheaded Petal’s Series D financing, with participation from Valar Ventures, CUNA Mutual, Encore Bank, Volery Capital Partners, and several other investors.

To date, Petal has secured over $240 million in equity funding and more than $450 million in debt financing.

Investor Perspective

Rishi Reddy, head of venture and growth investing at Tarsadia, recognizes the shortcomings of the traditional credit system and the need for more accessible financial products.

He highlights Petal’s impressive user growth and the effectiveness of its technology, as demonstrated by strong credit performance and the successful scaling of Prism.

Future Plans

Petal intends to utilize the new capital to expand its team, add hundreds of thousands of new cardmembers, and introduce new features and benefits to its cards throughout 2022.