Most young adults don’t have credit cards these days. Many of them are concerned about accruing debt. Others are finding it difficult to build credit.
A handful of startups are now focused on building alternatives. One of these is Deserve, which recently changed its name from SelfScore.
The Menlo Park-based startup had been working with international students to assess credit. Now it’s created a credit card that it hopes will appeal to Generation Z, or college-aged teens. It’s announcing $12 million in funding led by Accel, with participation from Aspect Ventures, Mission Holdings and others.
“Our mission is to provide access to fair credit to deserving but underserved populations,” CEO and co-founder Kalpesh Kapadia told TechCrunch. “Most of these kids do not have credit history. They cannot get credit cards without having credit scores.”
He believes that better indicators of creditworthiness are “reliability, discipline, education, employment.” Deserve says it uses machine learning to determine these characteristics.
Yet there are risks to working with people with unproven track records. Like other credit card businesses, Deserve hopes that the money generated from interest will offset the risk.
Theresia Gouw, co-founder of Aspect Ventures, says that she invested because she believes there is a “huge opportunity for fintech companies, like Deserve, who are using innovative technology and provide a fair and transparent user experience to their customers.”
Sameer Gandhi, partner at Accel, says he invested because he believes “Deserve’s application of machine learning is a big opportunity to advance beyond the FICO system in a technologically sophisticated way and give future generations better ways to establish credit. Additionally, Deserve’s consumer-centric focus and innovative underwriting not only expand access to credit for Millennials and Gen Z’s, but also resonate with their values of building financial independence.”
Deserve plans to use the funding to build out its new credit card business. It previously raised more than $14 million.