Investors pour $30 million into Petal's AI-powered alternative credit card

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Petal, a startup that uses uses artificial intelligence to target consumers with no credit histories and blemished records, has raised $30 million in a Series B fund raising round led by Valar Ventures, which is the firm’s second investment in Petal.

The New York based Petal uses machine learning to optimize the limited financial data available for low-information consumer groups and millennials, who often turn to installment loans from companies such as Affirm, Klarna and PayPal Credit.

Traditional risk underwriting methods often reject applications or don’t work for consumers who do not obtaining credit early in their lives. As obtaining credit cards for younger consumers has become more difficult after the CARD Act in 2009, specialists such as Petal rely on emerging data innovation for underwriting.

Petal received a $13 million Series A capital raise in early 2018, which was led by PayPal co-founder Peter Thiel’s venture capital fund, Valar Ventures. Valar has also invested in the cross-border money transfer specialist Transferwise and the accounting software provider Xero. At the time of the Series A funding, Petal reported 40,000 customers. Petal later in 2018 secured a $34 million debt financing round from Silicon Valley Bank and Jefferies.

According to Crunchbase, a website that tracks investments in private fintechs, Petal had earlier raised over $50 million in four different funds rounds since 2017. Adding the additional $30 million brings the total debt and equity funds raised to over $80 million.

In addition to the recently completed fund raising, Petal also announced the appointment of Parris Sanz, the former CEO at CAN Capital, who is joining as Petal’s general counsel, and Tom Greco, former senior vice president at GreenSky, who is joining as Petal’s vice president of customer operations.

When Petal formally launched its credit card in October, the company said that it had a waiting list of over 100,000 customers. Petal links to customers’ bank accounts and analyzes their monthly cash flow, such as how much they earn and save, as well as which bills they pay. It then uses this information to gauge their ability to manage debt. Petal also claims consumers can be approved for credit limits ranging from $500 to $10,000 at interest rates between 15.24 percent to 26.24 percent and has no fees.

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