Spotlight on New products, New Partnerships, New Potential -1

It’s Financial Inclusion Week 2017.

As a contribution to the theme “New products, New Partnerships, New Potential” and a build on Accion CFI and Institute of International Finance(IIF) publication “How Financial Institutions and Fintechs are Partnering for Inclusion: Lessons from the Frontlines”, I have prepared a spotlight on two Fintech whose activities resonate with these issues.

I begin with

image credit: Deserve

Firm name: Deserve (Formerly SelfScore)

Website: https://www.deserve.com

Year Founded: 2013

Country of Operation: United States

Company Description

Deserve (formerly SelfScore)[1] is a next generation analytics based consumer finance company that began with helping un(der)served international student populations gain financial independence through access to credit and establish their credit history while they study in the US. Recently, the firm extended its service offering to all students (either of U.S, U.S national, and International residency), and to all people who are new to credit. It offers three types of Mastercard branded credit products — Deserve Edu, Deserve Pro and Deserve Classic.

The Opportunity

1. International Student Populations

According to the U.S Department of Commerce economic impact analysis[2], 1,043,839 international students are responsible for some $32.8 billion in annual spending, including tuition during the 2015–2016 academic year. Despite this reality, conventional U.S banks and credit card issuers are slow in responding to the needs of international students, who upon graduation can pursue long-term careers here in the U.S.

2. Consumers in the United States without Credit

The United States is credit-driven, yet an adult population estimated at 26 million are “credit invisible” and an additional 19 million are unscorable by a commercially-available credit scoring model[3]. Of the estimated 26 million credit invisibles, over 10 million are younger than age 25. Across race or ethnic groups, a Consumer Financial Protection Bureau (CFPB) report found Blacks and Hispanics are more likely to have no credit history or not enough current credit history to produce a credit score.

These categories of un(der)served populations are of great interest to Deserve Cards in providing access to fair credit.

The Strategy

Partnering with Celtic Bank, a Utah-Chartered Industrial Bank, Deserve MasterCard products are issued as a credit card and an online account for its target demographic, which includes all college students in the U.S., as well as the general market.

With the original audience being international students in the United States, Deserve uses alternative data like ability to repay and predictive attributes such as education, major, cost of education, source of initial funding, and future employability, to determine international students’ creditworthiness.

To sign up international student applicants, they are required to provide scanned copies of their international passports, visas, contact information, and bank statements. While Deserve uses public information from the international students collected by the US Department of Homeland Security[4] and the National Student Clearinghouse[5].

Through grassroots and word-of-mouth marketing, Deserve creates awareness about its product. With the international students’ customer acquisition, the firm target potential sign-ups working with campuses, international student organizations and through social media particularly Facebook to find potential cardholders.

Now with its product extension to the U.S general market, Deserve intends to provide access to fair credit to deserving but un(der)served populations.

Result and Outlook

To actualize its lofty goals, Deserve has raised roughly $26.5 million[6] from institutional investors, seasoned entrepreneurs, and senior executives. The firm is set to build traction from consumers left out by mainstream credit like Generation Z, International Students, and American residents regardless of color.

Disclosure: The Author is a Deserve Edu Cardholder, and he is not receiving compensation from Deserve. The Spotlight was written to express insight into how the startup developed new product(s) through partnership with Financial Institutions to achieve new potentials towards financial inclusion.

Disclaimer: The information in this spotlight is intended for general informational purposes only, and is not to be construed as investment, legal, or other professional advice. As such, it should not be used, or relied upon, as a substitute for seeking professional investment, legal, or other advice. All information in this spotlight is provided “as-is”, with no guarantee of completeness, accuracy, timeliness, or other results obtained from the use of this information. In no event will the author(s), agents, or its affiliates be liable to you or anyone else for any decision made or action taken in reliance on the information in this Spotlight.

[1] https://www2.selfscore.com/wp-content/uploads/SelfScore-Fact-Sheet.pdf

[2]http://www.nafsa.org/Policy_and_Advocacy/Policy_Resources/Policy_Trends_and_Data/NAFSA_International_Student_Economic_Value_Tool/

[3] http://files.consumerfinance.gov/f/201505_cfpb_data-point-credit-invisibles.pdf

[4] https://www.ice.gov/sevis

[5] http://studentclearinghouse.info/onestop/wp-content/uploads/NSCFactSheet.pdf

http://www.argusleader.com/story/news/business-journal/2016/04/22/total-card-lands-new-mastercard-program/83356940/

[6]https://techcrunch.com/2017/10/24/deserve-raises-12-million-for-a-credit-card-targeting-college-students/