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  • Writer's pictureMike Caballero


How TomoCredit is Rethinking Underwriting

Adding users from their large waitlist, TomoCredit has begun offering their credit card with no credit score required to get approved. By using non-traditional data, TomoCredit is rethinking the methods to accurately assess creditworthiness. I sat down with the CEO and co-founder, Berkeley alum Kristy Kim, to learn about how TomoCredit is changing the process behind underwriting.

The Origin of TomoCredit

The story of TomoCredit began back when Kristy was an undergraduate studying at UC Berkeley. Originally from Seoul, South Korea, Kristy moved to the United States when she was 11 years old. At the time she started college, no one had explained to her the importance of a credit score, so naturally she didn’t worry about applying for a credit card. Throughout college, Kristy used the most convenient form of payment for her at the time, a debit card.

After Kristy had graduated and was working a well-paying investment banking job in San Francisco, she ran into a big problem. She began looking for and attempted to buy a car, but was denied because she lacked a credit score. Naturally, this was confusing and frustrating — she had an active banking history and the purchasing power from her job to buy the car. Worsening matters, she was told it would take her about two years to build up to the credit required for the loan. The problem ended with a lose-lose situation; Kristy bought the car in cash, not her preference nor the bank’s who would have made money off lending to Kristy. But this provided a realization of the outdated and inefficient nature of the American credit system, a realization that eventually led to TomoCredit.

Fast-forwarding to 2018, Kristy was head of investments for a Hong Kong hedge fund, a position that required her to travel between Asia and the United States quite often. On these work trips, she would meet many people who reminded her of her experience trying to buy a car without a credit score. These individuals had abundant assets but lacked a credit score in the US. She realized that this was becoming a mainstream problem impacting international students, foreign workers, and individuals who don’t know about a credit score, but are creditworthy. And because of the Internet of Things’ continuing growth, she also had a solution.

The Tomo Card

Her solution is the Tomo Card — the credit card that anyone can get approved for with no credit history. TomoCredit assesses eligibility based on banking history and offers quite a unique credit card. Because of their revenue model, TomoCredit has no interest rate, no late fees, no subscription fees, and no hidden fees entirely. It also has default autopay so users never have to worry about paying late. Because of the way TomoCredit analyzes banking history, it only extends lines of credit that are possible for users to pay back. And currently, TomoCredit is offering 20% cashback; starting from 1% in cashback, 1% is added for each person referred and approved (these bonuses last for 3 months), up to 20% in total.

Kristy presenting at Barclays Demo Day

As for their revenue model, TomoCredit only makes money on interchange fees, when the credit card is swiped, merchants pay appropriately 2-2.5% of the transaction to TomoCredit (standard for most credit cards). Unlike most credit card companies, TomoCredit gains nothing when users cannot pay back their bill because they have no late fees and no interest rate.

Behind the Scenes

So, how is this all now possible? Well, a lot has changed since Kristy’s car buying experience. 10 years ago it was almost impossible to use non-FICO data to underwrite, but now the infrastructure is present where TomoCredit can use financial history to provide extremely accurate assessments of creditworthiness. Today, people often use mobile banking which collects a great deal of data about personal finances. TomoCredit uses this banking data to underwrite customers instead of using their credit score.

If you want a credit card, “we look at your bank transactions… you connect your online banking account and TomoCredit analyzes your banking history and assets, like stock or crypo, based on that we decide how much credit to give you.” – Kristy, Co-Founder

And to ensure customer security, TomoCredit uses the third-party data aggregator Plaid to collect and analyze this banking data. One great example of this method’s efficacy is income verification. Many credit card companies help determine creditworthiness by asking for one’s income and using regular income verification methods, but TomoCredit skips these steps and can immediately recognize users’ income from their banking history.

“We are doing things totally different than any existing bank or credit card company.” – Kristy, Co-Founder

History of TomoCredit

TomoCredit started about one year ago in January 2019. Since then Kristy has built a six-person, full-time team around herself with multiple part-time workers. TomoCredit is currently based in San Francisco and just closed seed funding with multiple investors from notable financial firms including Barclays, as TomoCredit participated in the 2019 Barclays Accelerator.

The TomoCredit Team at Barclays Demo Day

Starting on October 15, TomoCredit launched the Tomo Card by creating a private environment where they only gave a small group of users access to the card. Kristy and the TomoCredit team chose to start with a private environment as in the first week they had approximately 2,000 signups — too many people to add at once. Currently, they have approximately 3,000 people on their waiting list and are looking to approve approximately 10,000 users for the Tomo Card in the first quarter of 2020. As for their target customers, TomoCredit is looking to approve mid to high-income people with purchasing power to ensure that credit is repaid.

Kristy believes that their ability to underwrite users without a FICO score gives TomoCredit a unique advantage — unlike the seemingly binary system of using FICO scores to determine creditworthiness, TomoCredit precisely measures users’ incomes and savings, and underwrites using these criteria.

“It’s very unconventional, but given our early metrics we are confident that this is the future of underwriting.” – Kristy, Co-Founder

The most important metric Kristy is referring to is the number of defaults. TomoCredit mainly is concerned with minimizing defaults to ensure their lending is repaid. And after two-and-a-half months of 1,000-1,500 transactions per month, TomoCredit has had no defaults.

The Future Looks Bright

Kristy believes the greatest challenge moving forward for TomoCredit is execution. Though other companies may enter this market, she believes many of TomoCredit’s advisors from industry staples will assist in taking the right steps moving forward. One critical part of execution will be training their model to limit defaults as they continue to add more and more people from the waitlist onto their platform.

TomoCredit’s interface for the Tomo Card

Kristy wants to execute as fast as she can to dominate this vertical — this means adding more people to the platform and ensuring TomoCredit has enough capital to lend to their users (currently they are on track). She believes that although there are some companies that have similar business plans like Brex, who uses non-traditional data to underwrite corporate credit cards, they are unique. TomoCredit is the only company with a functional product targeting mid to high-income people, and this distinguishes them from other competitors in the market. Overall, Kristy seems poised to change the future of underwriting with TomoCredit.

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