Credit Sesame’s new Credit Builder lets users build a credit score through purchases on the Credit Sesame Prepaid Debit Card by pairing it with a virtual credit card. Users can set the amount they want to allocate to create credit and Credit Sesame’s computer calculates the debit expense to match that amount and reports it to the credit bureaus via the virtual credit card .
“As you make these purchases, an amount equal to the balance on your virtual secured credit card is also set aside in your Sesame Cash account to ensure that you are able to pay off the balance on your virtual secured credit card. Can make payments on time. Every month,” the company’s web site states.
“We have brought the two products together and brought a digital bank account and a secure card,” explained Miro Pavletic, Head of Global Banking, General Manager. If you don’t have a credit profile you can go to our platform, capture a picture of your identity like a driving license or passport from your phone and we can create one
Digital account for you. ,
Credit Sesame is targeting people who don’t have a good credit score, or perhaps no credit score – credit is invisible. This amounts to about 44 million Americans, Pavletic said, and it’s a real hurdle.
“People without a good credit score will pay more for car loans and even for car insurance, and that lack of credit score will work against them when they apply for jobs.” Has helped over a million Americans improve their credit scores.”
The results have been impressive. “Ninety percent of consumers who did not have a credit profile in their first month went from 0 to 600 credit scores. No one in the industry is doing this right now. We are the unbanked and underbanked in the ecosystem. Let’s see a huge opportunity to bring that.”
New customers of Credit Sesame can now enroll via mobile devices, Pavletic said, a result of the continued introduction of new models of smartphones year after year. They can use the phone to take a picture of a driver’s license or passport to confirm their identity.
“Over the past two years we have seen a big change – people who didn’t have access to mobile devices now have it, as trade-in devices are resold on secondary markets at a much lower price than those individuals. provide access to those who ‘have not had a cell phone before’.
He said that the prices of used smartphones can range from $200 to $700.
He said credit bureaus are really open to finding ways to bring previously invisible consumers into their credit scoring systems. Equifax recently announced that it will begin reporting Buy First, Pay Later (BFPL) transactions starting in 2022.
Pavletic is happy that regulators, such as the Consumer Finance Protection Bureau, are looking into BNPL. Big players just want to know the rules and adjust their models if necessary. He said BNPL enforces discipline which credit cards do not.
“With the traditional card you get approved for $5,000 or $10,000 and nothing stops you from using it. With BNPL if you miss a payment, you can’t do any further transactions, which is a debt. prevents it from accumulating.”
Statistics across states show that 25% to 33% of BNPL customers have missed payments, but this is not bad, he said. A YouGov survey stated that 70% of BNPL customers never missed a payment, and 90% who missed it caught early.
Many people who don’t use banks have money, Pavletic said, and they’re simultaneously looking for solutions while away from banks. Some former bank users have concluded that they cannot afford a bank account with monthly account fees, unpredictable rules when deposits are made and high bounced check fees.
“We are really surprised by a lot of misconceptions among people who are under-banked or under-served. Many individuals who are not using banking products, are in cash economy or they are using prepaid cards, apps that can keep balance. The opportunity we have seen is among people who are not poor, they don’t have credit profiles.”
He sees an aversion to traditional banking among the new generation – two-thirds of millennials do not have a credit card because they are avoiding credit card debt, he said.
“But you may want to create a credit profile even when you don’t have a credit card. We are the only credit score provider that rewards our users – if your score goes above 10 points in a 30-day period, So we reward you with $10, if it goes up 100 points in a 30-day period we award you $100. We provide those incentives for people to get into the ecosystem. We’ve created your credit profile integrated with your daily spending to show how your purchases can affect your credit score.
How does a banking service provider that does not charge a fee pay the rewards? Where does it make its money? Unlike Simple & Move that relies on debit card interchange fees, Credit Sesame combines a banking account with a referral service that pays it a commission.
Like well-known consumer advice and rating sites like Credit Karma, NerdWallet and MagnifyMoney, Credit Sesame has a credit marketplace where it lists and ranks financial products such as credit cards, home and auto insurance, life insurance, loans and mortgages, and earnings. Is. A commission from referrals. He said the company has been profitable for more than two years.
“We believe that we are creating lifetime value, a product that grows over time. It will enhance the products and services you need,” Pavletik said. This could be a low-interest credit card or a personal loan to get started. The bigger aspiration is getting users to round up their purchases to the nearest dollar, or add up $1 or $5 or $10 — the extra amount goes into a savings account. Credit Sesame lets users create virtual wallets to save for specific goals such as a car, vacation, home or retirement investment.
“We want to build really strong relationships with our consumers and grow with them along the way.”
Credit Sesame provides value to its partners such as credit card companies or mortgage providers by pre-qualifying them for them.
“We know their credit score and we know their goals.”