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Kalpesh Kapadia, Deserve CEO
Courtesy of Kalpesh Kapadia
Goldman Sachs is betting on a Silicon Valley start-up that’s seeking to modernize the systems underpinning the credit card industry.
The bank is lead investor in a $50 million round in Deserve, a firm that offers credit cards directly to nontraditional consumers with little credit history and other deficiencies using a cloud-based platform to determine their creditworthiness. It also sells that platform to corporations for them to offer their own branded cards.
The company, which started out as SelfScore in 2013, initially targeted international students who couldn’t get traditional credit cards. It later opened up to other groups of millennials who struggle to qualify for traditional cards because they lack a credit history. It used machine learning and alternative data sets to make the determination whether to issue the cards.
Last year, the firm returned to its original plan of offering its tech to financial institutions and other companies, what it’s dubbed “credit card as a service.” Most of the industry still relies on 1970s-era technology, including mainframes and the COBOL programming language, according to Deserve CEO Kalpesh Kapadia.
“There’s a need for a modern, mobile-first, digital-first, highly configurable solution that’s completely in the cloud,” Kapadia said in a phone interview. “Goldman sees the value in that, given they didn’t have any legacy infrastructure when they started Marcus.”
Marcus, Goldman’s online banking service, started in 2016.
Competitors in the white-label and co-branded credit card space include Synchrony Financial and Alliance Data.
Kapadia declined to disclose his firm’s valuation after the series C round; Sallie Mae, Accel, Aspect Ventures, Pelion Venture Partners and Mission Holdings also invested.