Owning a credit card has never been more vital. The pandemic is forcing millions of people to stay home and ramp up their reliance on electronic payments. But the financial institutions that issue credit cards are making it tougher, not easier, to get credit.
In the United States, 21 percent of credit applications were denied in 2020, according to a recent survey.
Applicants are being rejected just when they need credit the most. Among those being turned down are high-earning recent graduates, immigrants and other creditworthy working professionals without a long enough credit history to prove it. They simply have not been paying enough bills long enough to get the credit rating scores used by traditional card issuers.
Millions of reliable people are being denied the credit they need – and the financial services industry is losing millions of dollars by refusing to serve them.
Enter Jasper, an Israeli startup operating in the US that targets this growing, affluent and underrecognized sector of consumers who cannot get a card from traditional players.
Jasper does this not by taking more risks, but by using technology and alternative data instead of the industry’s long-established credit score when approving applications.
“Our goal is not looking at how to eliminate people from getting a credit card,” said Jasper founder and CEO Elnor Rozenrot. “We are focusing on how to bring them in and get them a credit card.”
While most credit-card issuers rely on credit scores based solely on a person’s bill payment history, Jasper analyzes more than 400 data points for its applicants, including where they studied and what hobbies they have.
“We try to look at who you are, and figure out what your income and payment ability will be,” Rozenrot said. “The basic idea is that we use machines to do the work your banker used to do 30 years ago, when your banker would know you personally and decide how much credit to give you.”
The Jasper Mastercard is “especially helpful to customers who are new to credit in the US, such as young adults who have recently started their professional lives and professionals who have recently relocated to the US for work,” according to a review from Money Under 30.
Jasper is part of Israel’s growing financial technology sector, which accounted for more than 17 percent of total high-tech investments in 2020, and is based on the country’s long-established strengths in big data, artificial intelligence and cybersecurity.
“These tech solutions improve access to financial products for consumers, and also result in more efficiency in granting those products,” said Nicole Krieger, a fintech analyst at Start-up Nation Central.
Jasper has developed a series of algorithms to analyze publicly available personal information, as well as data from private databases, to assess an applicant’s financial status, how responsible they are, and their potential for financial stability and success.
“We don’t just look at their credit history, but go and search for other data about them, and even if they have a thin credit history we see that they often have great earning potential,” said Rozenrot.
“I just left college, have no credit history, but with Jasper I got a $5,000 credit limit,” said one new customer. “And all I had to do was fill out one form.”
This method of evaluation has put Jasper on the leading edge of a general move toward broadening the data taken into account for granting credit, said Ron Shevlin, managing director of fintech research at Cornerstone Advisors, an Arizona-based banking consulting firm.
“What I expect to happen over the next few years is that we’ll see the emergence of a widely-accepted financial health score, or set of scores, that measures financial health more broadly,” Shevlin said.
Jasper’s investors include OurCrowd, Off the Grid Ventures, VU Venture Partners, and Saar Wilf, a serial entrepreneur and founder of 10 startups including Fraud Sciences, which was acquired by PayPal for $169 million.
In addition to issuing credit cards, Jasper aims to help customers build a credit history, which is necessary for obtaining other forms of future credit, including mortgages and personal loans. It does this by offering automated payment plans that encourage their customers to do things like pay bills early and never carry a balance worth more than 20% of their credit limit.
“Paying early and not exceeding a certain percentage of your credit limit helps build up your credit score faster,” Rozenrot said.
Another goal for Jasper is keeping customers out of debt, an unusual aim in the credit card industry, where profit has long been based on interest from unpaid account balances, he said.
“We consider it our job to help you build a healthy financial life,” Rozenrot said. While most credit card companies earn money from charging interest on unpaid balances, Jasper’s model relies on revenue from the interchange fees that merchants accepting credit cards must pay to card issuers on each transaction.
“We make more than an adequate return on the interchange,” he said. “This is also more effective than relying on interest. At the end of the day, if you have a lot of customers not paying their bills, a lot of what you have earned in interest will just get eaten up covering charge-offs for customers not paying their bills.”
“We think this is actually a better and more accurate way to assess people’s ability to pay,” Rozenrot said. “We believe finances should be simple and work for customers, not against them.”
For more information about Jasper, click HERE.