Deserve valuation tops $500M as Mastercard and Ally Ventures invest

Deserve, a credit card technology startup, raised $50 million from backers including Mastercard and Ally Financial’s strategic investment arm, its chief executive said in an interview.

Mission Holdings, Goldman Sachs Group, Sallie Mae and other existing investors participated in the funding round, proceeds of which will be used to launch card programs and accelerate growth, CEO Kalpesh Kapadia said. The company is seeking to provide rewards unlike traditional methods of cash-back, points or miles. Already, one of its partners, BlockFi, offers cryptocurrency rewards and another, Seneca Women, rewards spending at women-owned businesses.

Kalpesh Kapadia, Deserve’s chief executive.

The funding round values the Palo Alto, California-based company at more than $500 million, according to a person with knowledge of the matter.

“We are Instagram to the credit card industry’s Kodak,” Kapadia said, referencing Deserve’s plastic- and metal-free operations. Its software enables companies to offer digital credit cards that can be applied for and used on iPhones or Android devices. “People may forget their wallets, but they never forget their phones,” he added.

Deserve and the Apple Card have a huge lead over competitors, said Saurabh Mittal, founder of Mission Holdings, which first invested in the startup’s seed round in 2014. “There’s an exponential growth story that will play out over the next couple of decades,” he said.

The company is striving to achieve profitability by the first half of 2023, and will consider options for going public when it’s closer to that milestone, Kapadia said. It will explore new lending products that could include payroll advances, “buy now pay later” programs and installment loans, he added.

Deserve uses so-called deep machine learning and artificial intelligence, and says its underwriting process, in addition to FICO scores, relies upon income and employment data. The company touts “single-call resolution” user support which should lead to fewer delinquencies, charge-backs and disputes.

“Credit cards are an area of interest for Ally, and Deserve —
with its digital-first approach — is a disruptive company in this space,” said Dinesh Chopra, chief strategy and corporate development officer at Ally. Ally doesn’t currently offer a credit card but has expressed interest in unsecured lending, he added.

Ally last year abandoned plans to buy the subprime credit card lender CardWorks.

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