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Japanese payment service provider Paidy raises $48M from ITOCHU

Paidy, a Japanese fintech startup that allows customers to make online purchases without credit cards, announced today that it has raised a $48 million Series C extension from ITOCHU.

The company says it has now raised a total of $281 million in equity and debt. Its latest investment from ITOCHU, one of the largest Japanese trading companies, was equity funding. ITOCHU previously participated in Paidy’s Series B and C rounds, and this brings the total it has invested into the startup to $91 million (the company said it did an extension round instead of moving onto a Series D so it could issue the same type of preferred shares).

Paidy’s last funding announcement was in November 2019, with investors including PayPal Ventures. The company has now raised a total of $281 million in equity and debt.

The latest funding will be used to strengthen Paidy’s balance sheet during the COVID-19 pandemic and also support the development of more “buy now pay later” services it will launch later this year.

Paidy’s payment service allows users to make purchases online, and then pay for them each month in a consolidated bill. The company uses proprietary technology to score creditworthiness, underwrite transactions and guarantee payment to merchants. Since many Japanese consumers prefer not to use credit cards for online payments, Paidy’s service can help vendors increase their conversion rates, average order values and repeat purchases.

During the pandemic, the company says usage of its service has increased since more people are buying essential items online, despite declines in spending on travel, hotels and large-ticket items (a state of emergency was declared in Japan last week in Tokyo and six other prefectures).

Shuichi Kato, the executive officer and executive president of ITOCHU’s ICT and Financial Business company, said in a statement that, “We strongly beieve that they will keep playing a critical role in our retail finance strategy as their one-of-a-kind credit examination has been creating a new type of trust, appealing to a wide range of customers. Paidy has also proved that they are capable of implementing prompt solutions in the inevitable battles against fraud, evolving their services to the next level.”

Read more: https://techcrunch.com/2020/04/09/japanese-payment-service-provider-paidy-raises-43-million-from-itochu/

Credit Cards

Tens of Millions of Credit Card Applications Stolen in Capital One Breach

The FBI arrested a Seattle woman Monday morning for the alleged theft of tens of millions of Capital One customer data spanning 14 years.

Paige Thompson allegedly stole more than a million U.S. and Canadian social security numbers, 77,000 bank account numbers, and a trove of other data from tens of millions of people who applied for Capital One credit cards. A Capital One press release said that, in total, roughly 100 million U.S. customers were affected, as were 6 million Canadian ones.

Paige Thompson allegedly bragged about having the information online: Ive basically strapped myself with a bomb vest, [expletive] dropping capitol ones dox and admitting it, she wrote in one post, The Washington Post reported. At federal court Monday, she was ordered to remain in jail until her scheduled Thursday hearing, according to Bloomberg.

She allegedly accessed all the information people would offer when applying for credit cards: self-reported income, credit scores, cash balances, names, addresses, zip codes/postal codes, phone numbers, email addresses, and dates of birth. The theft allegedly occurred between March 12 and July 17, and a security researcher discovered the flaw ten days ago.

Thompson was charged with one count of computer fraud and abuse and faces a maximum penalty five years in prison and a $250,000 fine. Court documents say she previously worked for a cloud computing company that provided services to Capital One. She intended to disseminate the data, according to the documents, but likely did not.

While I am grateful that the perpetrator has been caught, I am deeply sorry for what has happened, Richard Fairbank, chairman and CEO of Capital One, said in a statement. The bank said it fixed the vulnerability that allowed Thompson access and verified that no one else had breached its databases. It did not immediately respond to request for comment.

According to Capital Ones press release, most of the credit cards affected by the breach were not compromised.

The breach comes less than a week after Equifax announced a $700 million settlement over its lax handling of hundreds of millions of customers financial information.

Read more: https://www.thedailybeast.com/tens-of-millions-of-credit-card-applicationsnearly-80000-bank-account-numbers

Credit Cards

Using Spotify and Netflix payments to build your credit score? Grow Credit has a service for that.

Can subscriptions and everyday payments be used to help build or rebuild a credit score? The Los Angeles-based Grow Credit thinks so.

The service, which launched earlier this month, is one of the slew of new ideas coming from businesses that are angling to help build up credit scores for folks who can’t (or won’t) get a credit card, or who are rebuilding their credit.

The company is the latest evolution of a credit-based approach to financial services from the LA-based serial entrepreneur, Joe Bayen.

Bayen’s last startup was Lenny, a credit monitoring and lending service that was aimed at helping people better manage their payments to avoid damaging their credit scores.

Bayen scrapped the Lenny business model after realizing that he’d have a hard time finding a debt financing partner. So Bayen resolved to be more of a sourcing partner for new customers rather than developing a credit and lending business himself.

Hatch Bank, the new business arm for Firstrust Bank, is acting as the lender of record for Grow Credit’s secured Mastercard credit business.

Bayen has always been focused on helping the under-banked make better decisions, and in-between Grow Credit and Lenny there was still another business model that Bayen wanted to try.

It would have been a platform called LennyBike, which would have been a subscription service for customers to get access to a bicycle for $30 a month, and those payments would then count toward building credit.

However, it’s a much simpler proposition to get people to use their existing subscription services as a credit-building device than trying to get folks to pay for something new… thus, Grow Credit was born. (It also didn’t help that Bird raised $300 million and Lime another $250 million around the time that Lenny Bike was trying to get to market.)

The company uses a virtual Mastercard that allows for consumers to pay for online subscriptions only. “We have been able to transform a healthy, positive habit, which is making subscription payments, and we have turned that into a credit-building opportunity,” says Bayen.

It’s a pretty elegant way to solve a problem that’s a real barrier to entry for a large number of financial services. Credit scores can impact mortgages, the ability to receive small business loans and a host of other services that are ways to boost economic opportunity.

The company has even brought on board experienced executives like Nick Roberts, the former chief marketing officer of Acorns, to help get their messaging out.

There are two main competitors to a service like Grow Credit in the market for providing opportunities to build up a credit score, Roberts says. One is forced savings programs, the other is using fixed-limit credit cards with massive fees. A host of new services that would use reporting utility, rental, mobile phone payments and other monthly expenditures toward credit scoring have yet to gain traction.

Grow Credit offers 0% APR financing for its service, but has two tiers. A free tier for an unlimited $25 revolving credit line and a subscription service that charges $4.99 for a 12-month service offering periodic credit limit increases of up to $300. Both the free and subscription versions offer free FICO scores and automatic subscription detection.

The company makes money by giving subscription services the chance to upsell customers using the credit lines. ClassPass has already signed on as a partner, according to Bayen.

“This is establishing a small dollar loan and a line of credit,” says Roberts. “People on debit cards and stored value cards that are out there… they’re  using debit cards so the money is immediately debited from their account. What we’re doing is paying the bill and establishing the line of credit and getting paid back at the end of the month.”

The idea of using more data sources and alternative data to how credit bureaus determine credit scores is one that’s already resonating with a few Democratic contenders for the presidential nomination.

Senator Kamala Harris has called for amending the Fair Credit Reporting Act to require credit agencies to include rent payments, cellphone bills and things like utility payments in their credit score calculations.

Roughly 26 million people are invisible to credit ratings and another 19 million have files that are unscorable, according to the Consumer Financial Protection Bureau . These are people who lack enough bank or credit-union accounts to have a credit score — and they’re a group that’s more likely to include African American and Latinx consumers.

Roughly 15% of African American and Latinx consumers are unable to receive a credit rating, according to data from the Consumer Financial Protection Bureau, as cited by MarketWatch.

“Expanding the calculation of credit scores to include payments made on rent, phone bills, and other utilities will increase access to credit for those with a limited or ‘invisible’ credit history or poor credit scores,” according to the Harris website.

Read more: https://techcrunch.com/2019/07/23/using-spotify-and-netflix-payments-to-build-your-credit-score-grow-credit-has-a-service-for-that/