Constructing credit score historical past could be tough in case you are a client that’s having bother gaining access to credit score in the primary place.
Enter TomoCredit, which has developed a bank card centered on constructing credit score historical past for first-time debtors. The San Francisco-based startup is saying right this moment that it has raised $10 million in a Series A funding round co-led by Kapor Capital and KB Funding Inc. (KBIC), a subsidiary of South Korea’s main client financial institution. Lewis & Clark Ventures, AME Cloud Ventures, Knollwood Funding Advisory, WTI, Bronze and Square co-founder Sam Wen additionally participated in the Series A financing.
The brand new capital comes simply over seven months after TomoCredit raised $7 million in seed funding, and brings its complete raised this 12 months to $17 million. The corporate additionally introduced right this moment it has appointed Ash Gupta, former CRO at American Categorical, to its board.
TomoCredit co-founder and CEO Kristy Kim got here up with the idea for the corporate after being rejected a number of occasions for an auto mortgage whereas in her early 20s.
Kim, who immigrated to the U.S. from South Korea along with her household as a baby, was upset that her lack of credit score historical past proved to be such an impediment regardless of the very fact she had a job “and optimistic money move.”
So she teamed up with Dmitry Kashlev, a Russian immigrant, in January of 2019 to create an answer for different foreign-born people and younger adults going through comparable credit score challenges. That fall, the startup (brief for Tomorrow’s Credit score) was accepted into the Barclays Accelerator, powered by Techstars.
The fintech provides a bank card aimed toward serving to first-time debtors construct credit score historical past, based mostly on their money move, relatively than on their FICO or credit score report scores. Its greatest differentiator, believes Kim, is that it has no charges, no APR and no credit score pull. Conventional credit score merchandise rely closely on charges and APR, she mentioned, whereas TomoCredit makes cash via service provider charges.
TomoCredit is powered by Finicity (which was acquired by Mastercard final 12 months), and leverages that firm’s knowledge community and open banking know-how in order that it might “securely” entry candidates’ financial institution accounts to acquire monetary knowledge for underwriting functions.
As soon as accepted, candidates obtain the TomoCredit Mastercard. The objective is to deliver “tens of millions of people that lack a credit score rating into the monetary system, permitting a various group of shoppers the chance to higher place themselves as certified candidates for mortgages, auto loans, or different main life purchases,” the corporate mentioned.
TomoCredit has already pre-approved greater than 300,000 prospects and expects to situation a complete of 500,000 playing cards by 12 months’s finish, in response to Kim.
“We’ve grown 10x this 12 months from the start of 2021,” Kim mentioned. “Nonetheless, this round got here collectively sooner than anticipated.”
One thing that has been stunning to Kim is the curiosity from quite a lot of varieties of shoppers.
“At first, we thought worldwide college students and immigrants could be most in our product,” she informed TechCrunch. “However after launching, we’ve realized that so many individuals can profit — from gig economic system employees to YouTubers to any younger one who hasn’t had an opportunity to construct credit score but. The market is manner greater than we even realized.”
In early 2022, the corporate plans to roll out the Tomo Black card, a product for a few of its current prospects that “are exhibiting good efficiency.” It’s at the moment testing it with a few of its current consumer base.
“This can be a premium product that may develop with our prospects, who we need to retain over the subsequent 10 to twenty years,” Kim mentioned. “We don’t need our product to be a stop-gap answer.”
The startup plans to make use of its new capital to do extra hiring and improve options akin to weekly autopay and excessive credit score limits in an effort to “enhance credit score scores quicker,” she added. At present, TomoCredit has about 30 workers, up from 10 on the time of its final increase in February.
“My primary focus is recruiting prime expertise,” Kim mentioned, noting that the corporate had already employed “some senior individuals from Wells Fargo.”
“Once we recruit and rent, we care about range,” she added. “We’re constructing merchandise for individuals who have been historically underserved by main banks. I believe to align with our mission, we should always embody that in constructing our staff. Greater than 50% of our execs are feminine. Your complete danger staff is feminine. We’re numerous in phrases of gender, age and ethnicity as a result of we need to really perceive our prospects and construct a product that’s inclusive.”
Brian Dixon, associate at Kapor Capital, factors out that there are about 45 million individuals in the U.S. who ought to have credit score scores, however can not take out a mortgage, get a bank card, or apply for a mortgage. And that quantity is barely growing.
“Once we discovered that Kristy skilled these points firsthand when she moved to america and thoughtfully found out a option to circumvent the predatory and damaged bank card system, it deepened our conviction in her and the product itself,” he wrote by way of e-mail.
Dixon believes that TomoCredit’s mannequin of not charging the consumer makes it a “secure and reasonably priced different” to what’s in the market.
“Their mission aligns with our thesis of closing gaps of entry and alternative in the credit score house at massive as properly,” he added.