These startups want to make credit scores a thing of the past – TechCrunch

Welcome to The Interchange! If you received this message in your inbox, thank you for registering and voting of confidence. If you are reading this is a post on our website, please subscribe here so you can receive directly in the future. Each week, I will review the hottest fintech news of the last week. This will include everything from funding rounds to trends, analyzing a particular space to highlighting activities about a particular company or phenomenon. There’s a lot of fintech news out there, and it’s my job to stay informed – and understand it – so you can stay informed. – Mary Ann

Credit scores have been around since 1989, or for more than three decades. They are also known as FICO scores; and FICO stands for Fair Isaac Corporation. The Consumer Financial Protection Bureau (CFPB) describes FICO as a “pioneer” in developing a credit scoring method based on information collected by credit reporting agencies. Many financial institutions have long touted the FICO score as a fair way to determine a person’s creditworthiness. Whether you can get a home loan and the amount of interest you pay is based on your FICO score. The higher it is, the more chances you have.

But there is a problem with this model. It seems to reward those who are already financially well and punish those who are not. And the rejection of applications for homes, cars or other types of loans can prolong a vicious cycle that cannot escape poverty or other conditions. For example, if you can’t get a loan to buy a car or can’t afford to pay the interest, it will be harder for you to get a job.

In recent years, a number of fintechs have emerged to try to challenge the current paradigm. In May, I wrote about Jay-Z-backed Altro, which raised $18 million to help people build credit through recurring payments like digital subscriptions to Netflix, Spotify and Hulu. Earlier this year, Petal announced that it was raising funds $140 million Series D funding round at an $800 million valuation to help improve the “broken” traditional credit system. Founded in 2016, New York-based Petal offers two Visa credit card products aimed at underserved consumers with little or no credit history. The startup says its goal is to help people “build credit, not debt”.

And last week, TechCrunch reported on two other companies that want to reduce credit on scores and more on how much cash an individual can have in the bank. First, Anita Ramaswamy wrote about X1, just raised $25 million in funding. X1 Card is taking a different approach by underwriting customers based on their income, not their credit score, which the company says allows it to set a credit limit up to 5 times higher than traditional card providers. It’s an attractive proposition for all those with steady incomes but low credit scores, such as recent college grads.

Then over the weekend TomoCredit announced its own raise – $22 million in equity with a valuation of $222 million. Founded by Korean immigrant Kristy Kim, the startup has also secured $100 million in debt. Like X1, TomoCredit does not rely on FICO scores for underwriting. Instead, it applies a “proprietary” underwriting algorithm (Tomo Score) to identify “high potential borrowers” ​​without a credit score. TomoCredit card requires no credit check, no deposit, 0% APR and no fees. The fintech company says it offers cardholders a credit limit of up to $30,000 based on their cash flow.

On this we say: what is fintech if it does not try to change the status quo??

Weekly News

Despite cooling market, spending management startup Ramp reported that it has more than doubled its revenue growth rate since the start of the year. March, Slopes confirms that it has secured $550 million in debt and $200 million in equity in a new financing double pricing to $8.1 billion. Now, the company isn’t just seeing more SMB customers – a reasonable assumption considering Ramp’s biggest competitor, Brex, recently announced that it would stop serving business in that directory. According to CEO and co-founder Eric Glyman, whom I interviewed, witness an increase in all stages of the company’s maturity.

Fintech funding boom of the the past few years has seen a huge amount of capital flow into so-called new banks, digital finance companies that provide banking services to markets – general and niche. The overarching idea behind the push has made sense – many traditional banks are digital first and second IRLs, and their traditional way of operating has created costs that are passed on to consumers . Honestly, it’s a pretty cool idea, and like any such idea, attracts a wide range of founders and financial backers. But after an epic fundraiser and a few exits, sentiment seems to have shifted against this pattern. How many anchor banks can the market really support? Some of these have disappeared also appropriate in their work to segment more sophisticated markets and tailor their products? Read more from Alex here (registration required).

Meta CEO Mark Zuckerberg announced that the company is launching a “payment in chat“On Instagram. With this new feature, users can buy products from small businesses and track orders via direct message on Instagram in the US. To take advantage of the new feature, users can start by sending a direct message to an eligible small business they’d like to make a purchase from. In that same thread, they will then be able to pay, track orders, and ask the business any follow-up questions.

As much as we can, we can’t seem to get rid of’s news. Natasha Mascarenhas reported on how the digital mortgage company is still trying to continue with its SPAC agreement despite all the negative headlines, investigations and lawsuits surrounding Better and/or its CEO, Vishal Garg. In the latest barrier technology, Inman reports that the SEC was investigating the company because Barclays and Citigroup – the banks that acted as advisers on the deal – had resigned and separated from the company. One might think disgruntled fired employees would be happy that is getting more government scrutiny. But a few employees have told me it’s actually the opposite – because if the SPAC doesn’t pass, their options will be of little or no value. One person in particular told me via Twitter DMs: “It doesn’t look good for SPAC. It’s been my silver lining for the whole experience. I am the person around. I think the employees deserve to be fair, but more than that, we enjoy the fruits of our labor.” It was the worker who expressed his disappointment with lawsuit filed by former executive Sarah Pierce against the company, said: “We were all robbed. It’s horribly ironic that a rich man’s battle for ‘justice’ has ruined thousands of employees’ chances of closing or anything like compensation. “

Talk about mortgage tech companiesDenver-based startup Maxwell has released Maxwell Español, a loan app in Spanish, it says offers “a fully translated loan application, from landing page to submission”. In a blog post, the company said many current point-of-sale systems rely on translation through a Spanish-speaking representative or provide only Spanish-language landing pages or subtitles in loan applications. In contrast, Maxwell says their new app provides a “rich Spanish language experience”. The company claims that the new offer will help lenders better attract, convert, and engage native Spanish speakers.

A new fintech has emerged with a mission to accelerate access to impact investing in private markets. Specifically, Josh Hile and Marshall Dunford founded Citizen Mint, a new impact investing platform designed to help investors generate both financial returns and positive social and environmental impacts. . “The need to invest, especially among Generation X and Millennials, to match financial resources with personal interests and values ​​is simply not being met in today’s marketplace,” said Hile, who will take the role. role as CEO and Chief Investment Officer of Citizen Mint, said in an emailed statement. Than here.

Finance and mergers and acquisitions

Sudanese Fintech Bloom Raises $6.5 Million Backed by Y Combinator, GFC and Visa

Arrenda emerges with Adelanta, a financing offering for Latin American homeowners

Casavo, an Opendoor-style proptech company from Italy, raises $410 million to expand its instant buyer platform across Europe

Fonoa raises $60 million to automate tax compliance and calculations for global companies like Uber and Zoom

TechCrunch is excited to announce the launch Top Contributor Sessions: Cryptocurrencies, take place on November 17 in Miami, Florida. This is our first dedicated foray into the crypto space and we can’t wait to hear from some of the leaders, shakers and risk takers in web3, DeFi and NFT. . Take advantage of our special launch price. Buy your pass or starter pack today and save $250 and $200, respectively.

And with that, I’m out of here. Once again, thank you very much for your support and have a great weekend. xoxo Mary Ann

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