Empower enters the U.S. credit card category and the Southeast Asian credit market, poised to revolutionize lending with a smarter, more inclusive approach to underwriting and product innovation.
Empower Finance, Inc. has entered into a definitive agreement to acquire Petal, a consumer credit card and financial technology company headquartered in New York, and completed its acquisition of Cashalo, a consumer credit and lending company headquartered in the Philippines. Empower is a leader in alternative credit underwriting and a pioneer in financial product innovations for underserved consumers in the U.S. and Mexico. The combined companies will fold into Empower and continue to transform the way people access and build credit, enabling greater participation in established and emerging credit economies.
Empower underwrites individuals using real-time cash flow, other nontraditional data, and machine learning to assess financial responsibility and credit risk differently than mainstream lenders, which rely primarily on credit agency reporting. This proprietary underwriting, coupled with credit products that are uniquely structured to match today’s fluid working patterns, allows the company to offer lines of credit, which are issued by FinWise Bank, Member FDIC, and no-interest advances to 3 in 4 consumers who would otherwise have minimal access to liquidity. Founded in 2016, Empower has 2 million active subscribers and achieved profitability in 2022.
Petal and Cashalo give Empower strategic footholds in the credit card category in the U.S. and the credit market in Southeast Asia, respectively. “In both companies, we found a shared commitment to harnessing technology and rich alternative data to unlock financial opportunity for more people who merit our consideration. I’m confident that by merging Petal and Cashalo into Empower, we amass new product, operational, and analytical capabilities to help alleviate the credit insecurity that billions of people around the world struggle with,” says Warren Hogarth, Co-Founder and CEO of Empower (and former Partner at Sequoia Capital).
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Petal pioneered access to high-quality Visa® credit cards that don’t require a credit score to qualify, via cash flow underwriting, enabling individuals to use their open banking data to qualify for credit and establish a credit history. This technology makes credit more accessible to millions of U.S. consumers without credit histories, or for whom traditional credit scores do not tell the whole story. Since 2018, nearly 400,000 consumers have been approved for the Petal credit card, which is issued by WebBank; the majority of those consumers had thin or no credit files at the time they were approved.
This shared approach is vital to solving gaps in U.S. credit accessibility. Despite the maturity of the U.S. credit economy, TransUnion reports that over 45 million consumers are considered to be credit unserved or underserved. Credit card approval rates vary significantly by credit tier according to the Consumer Financial Protection Bureau in their 2022 review of the consumer credit card market. Over 60% of general-purpose card applications submitted by consumers with prime and above-prime credit scores were approved, while just 20% of applications submitted by consumers with no score and 17% of applications submitted by consumers in the non-prime credit tier were approved.
“Safe, affordable credit is unavailable to tens of millions of consumers in the U.S. and billions worldwide. We believe that modern product design and new technologies like cash flow underwriting can be used to radically improve credit access around the world,” says Jason Rosen, Petal’s Co-Founder. “This merger brings together two of the leading innovators in this arena. Our combined product offerings, financial strength, technical capabilities, and global reach will allow us to move much faster to close the equity gap in credit.”
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