CreditStacks, which has developed a credit card issuing service, has completed a $4 million seed round. Among the investors in the round are 500 Startups, Clear Future, and Off the Grid Ventures, as well as financial services entrepreneurs such as Saar Wilf, founder of FraudSciences, which was sold to PayPal in 2008.
CreditStacks offers its service in the US. Unlike banks in the US, it does not require its customers' credit history.
CreditStacks co-founder and CTO Shahar Nechmad told "Globes", "Every year, there are very many people who move to the US, or people who have just started to need credit, because they have finished college and started to work, and are just beginning their lives. Many of these are good people, but because they have no credit history the banks can't deal with them, and refuse to give them a credit limit. It can be frustrating to see your American friends with their platinum cards accumulating air miles, and it's frustrating because you need credit in order to build a credit history.
"Banks try to find reasons not to give you credit, but we work the opposite way: we build a model of who we do want. We construct groups, each of which has different criteria: people who have recently moved to the US, who have good jobs, who earn a certain amount of money. The first large group on which we are focusing is what we call work migrants. A second group is of people who move to the US with work migrants, such as members of their families, and the third group we want to reach is people who have finished college. These are what we call mother groups, and we divide them into smaller groups. There will be a different group for someone who moved from India to work in technology development and for someone who moved to become a university professor. The method of finding positive data rather than negative data is what one of our angels, Saar Wilf, brought with him. That was his model at FraudSciences for preventing financial fraud."
Nechmad says that the division into small groups has a double advantage. "One is that we can check retrospectively how well people fit these groups according to their credit activity in order to improve our model. The second, and most important thing is that it enables us to do personalization of benefits, because I can know exactly who the customer is - whether he or she is a high-tech entrepreneur or a person in finance." The amount of information required from each customer depends on the group, says Nechmad. "In the work migrant group, they need to show confirmation from their employer and the job they are coming to, and a valid passport."
The division of people into groups will not mean giving preference to certain people because of their identity. "There are very strict laws about this in the US, and it is not permitted to give preference to people from a certain location, or a certain ethnicity, a certain religion, and so on., Our model will not give preference to a person because of his location, but will verify that he is capable of repaying his credit."
The model makes it possible to submit an application form in ten minutes. Approval takes longer, but Credit Stacks hopes eventually to shorten the time taken. "The model produces the results automatically, but at present there is an analyst who receives all the information and makes a financial decision, as in any bank. The goal is to make the entire process automatic and speed it up in the future."
The company works with Mastercard, and provides a service that makes it possible to receive a credit card from the first day in the US for workers relocating there, with a high credit limit , and without the need to present a credit history in the US. CreditStacks promised to provide backing from banks of up to $500 million for these credit limits. The business model includes private customers who come to CeditStacks directly. This is usually a matter of a group of immigrants from a particular place who know one another and among whom word about CreditStacks get around. CreditStacks also works with the human resources departments of the companies that bring in these work migrants, such as Google, and with relocation companies.
CreditStacks was founded in 2015 by Israelis Elnor Rozenrot (CEO) and Jonathan Jacobi (chief risk officer), American banker Bob Hartheimer (chief regulatory officer), and Nechmad.
Published by Globes [online], Israel business news - www.globes-online.com - on January 28, 2018
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