Valar Ventures, the venture capitalist firm run by Peter Thiel, has pumped an additional $30 million into Petal, a credit card company which vets individuals’ digital-self during applications.
As a business, Petal is certainly an interesting one. Most credit companies assess an individual’s credit history before agreeing to lend any cash or offer financial products, however this potentially creates a problem; how do people get credit when they’ve never had it? The most fiscally responsible person might not be able to get a loan because they have not applied for credit services in the past.
Instead, Petal using various artificial intelligence applications to assess an individual’s digital financial profile, not simply a credit score. This is likely to give a much more complete picture of said person as it assesses the flow of cash in and out of the persons life. In theory, some people who have been turned down credit would now be applicable.
Although this idea is not necessarily mainstream, the concept is not new. Orange is another example of a company which is taking an alternative approach in finance. Using data collecting through its core telco business, the new banking venture can paint a picture of customers. For example, the ability to consistently pay mobile phone or broadband bills on time and in full, could contribute to understanding the risk associated with an individual applying for a personal loan.
Of course, an idea is only good as its success, and Petal has had a strong start in the FinTech world. There are currently more than 100,000 potential applicants, users who signed up during the beta test, while this $30 million fuel from Valar Ventures is the second funding round. Thiel’s firm also led the company’s $13 million series A round last year. With the new cash Petal’s CEO Jason Gross hopes to expand the customer base, hire new talent and bring new features to the product.
“Over the past two years, we’ve focused on building both an amazing team and a special product,” said Gross. “Now, with new funding and new leaders onboard we’re ready to meaningfully scale our business and team. We’re thankful for the support of our investors and partners and look forward to helping millions of people build credit with Petal.”
But over to the security element. This is where security breaches could start to make an impact on the world. The more personal information on an individual which is cruising the digital highways, the greater the likelihood of identity fraud. The world might be suffering from a bit of data-breach fatigue, but many are ignoring the issue because there hasn’t been any significant consequence.
As soon as stories about identity theft start emerging, the world will become much more aware and sensitive to the threat. In this case, when Petal is assessing the worthiness of a person the AI might come to some incorrect conclusions. We’re really starting to use this data effectively and now we just need to be sure we can protect it.
As an industry, it is important that this point is never realised, but this means proactive investment in security research and products. Security cannot no longer be considered an afterthought or a bolt-on as the implications are starting to become real. As long as Joe Bloggs is living in ignorance of the dangers of the digital economy, the industry is doing its job.