Empower Finance agrees to buy US credit fintech Petal

US-based credit card fintech Petal is to be acquired by Empower Finance, which provides alternative credit underwriting and financial products for underserved consumers in the US and Mexico.

Empower has entered into a definitive agreement to buy Petal, with the acquisition expected to close later this quarter.

Petal provides access to Visa credit cards for individuals without a credit history, via cash flow underwriting, enabling individuals to use their Open Banking data to qualify for credit and establish a credit history.

Since 2018, nearly 400,000 consumers have been approved for the Petal credit card, which is issued by WebBank, the majority of which had ‘thin’ or no credit files at time of approval.

In August last year, Petal closed a $200 million debt facility from Victory Park Capital and secured a new term loan facility for up to $20 million of incremental commitments with Trinity Capital, as well as additional equity funding from existing investors.

Last November, reports emerged that Petal had put itself up for sale.

Jason Rosen, Petal’s co-founder, said: “This merger brings together two of the leading innovators in this arena.

“Our combined product offerings, financial strength, technical capabilities, and global reach will allow us to move much faster to close the equity gap in credit.”

Empower has also completed its acquisition of Cashalo, a consumer credit and lending company headquartered in the Philippines.

Petal and Cashalo will fold into Empower, giving it “strategic footholds” in the credit card category in the US and the credit market in Southeast Asia, respectively.

Founded in 2016, Empower underwrites individuals using real-time cash flow, other non-traditional data, and machine learning to assess credit risk, unlike mainstream lenders which typically rely on credit agency reporting.

It now has two million active subscribers and became profitable in 2022.

“In both companies, we found a shared commitment to harnessing technology and rich alternative data to unlock financial opportunity for more people who merit our consideration,” said Warren Hogarth, co-founder and chief executive officer of Empower.

“I’m confident that by merging Petal and Cashalo into Empower, we amass new product, operational, and analytical capabilities to help alleviate the credit insecurity that billions of people around the world struggle with.”

“Safe, affordable credit is unavailable to tens of millions of consumers in the US and billions worldwide. We believe that modern product design and new technologies, like cash flow underwriting, can be used to radically improve credit access around the world,” Rosen added.