How Its Bold Moves to Tap into Underserved Markets Makes “Deserve” Deserve Top Position
In recent years, the market for credit cards and loan products to consumers has grown significantly, as more and more people have come to these financial tools to manage their daily expenses and make larger purchases. This growth can be attributed to a number of factors, including an increase in consumer spending, a growing number of people with access to credit, and a rise in online lending platforms that make it easier for consumers to apply for and receive credit.
Additionally, credit card and loan companies have become more innovative in their products and services, offering a wider range of options to meet the diverse needs of consumers. As a result, the demand for these products is expected to continue to grow in the coming years, making this a lucrative industry for companies such as Deserve.
Based in Menlo Park, California, Deserve is a financial technology company that offers credit card and loan products to consumers, with a focus on those who may have limited credit history. Led by its founders, Kalpesh Kapadia, Madhusudan E, and Abhilash Kumar, the company has been able to create a successful business model by leveraging technology, targeting a specific demographic and providing educational resources and financial management tools to help customers make informed decisions and build a positive credit history.
We are excited to explore the background and details of the success of this company, including the technology and strategies adopted to establish it from the very beginning. To gain a comprehensive understanding of how the company, Deserve, has achieved success, we will take a closer look at it from multiple perspectives.
Uncommon Approach to Tap into Underserved Markets
“It is paramount that we prioritize resources to address and fuel our business partners’ most pressing needs. Seamlessly tackling this as we scale is one of our biggest and most exciting challenges. Credit cards are some of the most complex products to build in the finance space and require a certain level of scale to compete. Our next challenge is to quickly scale by adding new partners, new products, and attracting the best talent, all while keeping a keen eye on credit and fraud risk.” Kalpesh Kapadia stated.
As the CEO, Kalpesh Kapadia is responsible for the overall strategic direction and leadership of the organization. He brings experience in strategic planning and leadership, as well as a good understanding of the financial industry. Madhusudan E is the CTO and is responsible for the development and implementation of the company’s technology and product strategy. He has a strong background in software development and technology, which is essential in creating a fintech platform. The COO, Abhilash Kumar, brings experience in operations management and business development, which will be important in driving the company’s growth.
Each of these individuals bring a unique set of skills and expertise to the company. Together, the founders of Deserve have a strong background in technology and finance as well as master the skills and experience needed to lead the company and drive its growth.
“This puts us in the company of other innovators who use machine learning in new ways,” Kapadia said. “It marks us as a business on the cutting edge of new technologies. We are joined in our sector by such illustrious companies as Nvidia and Drive.ai.”
“We are a product driven company that uniquely offers the most modern and most complete credit card as a service platform. With our digital and mobile first approach, we are able to deeply embed credit card in a partner’s workflow thereby providing a seamless experience.” Kapadia said.
For the first time, the company was launched as SelfScore, with the focus of providing credit-building opportunities for students with no credit history or FICO score. This was accomplished by looking at their credit potential and not their risk, taking into consideration factors such as identity, stability of identity, earnings potential and ability to pay.
Later on, the company rebranded to Deserve to align with its mission of providing access to fair credit to deserving but underserved populations. This focuses on providing financial independence to millennials and Gen Zs is the driving force behind the company’s mission, and the rebranding to Deserve emphasizes this mission.
“The inspiration for starting Deserve derived from my own personal experience with the banking and credit system in the US.” Kapadia said. In addition to credit products, Deserve’s merchant services are also of interest to small businesses that are looking to accept credit card payments. The company’s merchant services provide small businesses with the tools and resources they need to accept payments, manage their finances, and grow their business.
Target market of this California-based fintech is primarily individuals and small businesses who need assistance with credit card processing and point-of-sale systems, particularly those who are new to credit or young consumers. These individuals may have limited credit history or no credit at all and are looking for credit-building opportunities to establish a positive credit score.
Deserve’s credit cards and other financial products offer a range of features and benefits that are designed to meet the needs of this demographic. For example, the company offers a student credit card that is specifically designed to help students establish credit and gain financial independence.
From Promoting Financial Stability to Addressing the Lack of Access to Credit
“Ultimately, we want to guide customers to building a positive credit history and a good credit score,” Kapadia said. “We stress access, advocacy, and independence”. Deserve’s mission is to provide fair credit access to underserved individuals and small businesses, and one of the main ways it accomplishes this is by addressing the issue of lack of access to credit.
This can be a significant problem for many individuals, especially those who are new to credit or have limited credit history. These individuals may have a hard time getting approved for a traditional credit card due to strict credit requirements and may be considered high-risk borrowers by traditional financial institutions.
Deserve recognizes this problem and has designed its credit cards to help individuals establish or build credit. The company may be more flexible in its credit requirements compared to other card issuers, making it easier for some individuals to qualify for a credit card even if they have limited or no credit history. This can be beneficial for individuals who are new to credit and are looking to establish a positive credit history, as well as for small businesses that are looking to expand their business but lack credit history.
The business also offers other financial products such as loans that can help people establish credit. Additionally, the company’s online application process is designed to be quick and easy, allowing individuals to apply for a credit card or other financial product in just a few minutes. The company also uses alternative data points to evaluate creditworthiness, which can be beneficial for individuals who have limited or no credit history.
More importantly, Deserve addresses the problem of complex rewards programs. Some credit card rewards programs can be confusing or hard to understand, making it difficult for consumers to get the most out of their cards. Deserve’s credit cards offer simple rewards programs that are easy to understand and use. This can be particularly beneficial for individuals who are looking for a credit card that offers rewards without the complexity of other credit card rewards programs.
However, launching a new credit card company can be a challenging task, especially for startups like Deserve. There are a number of barriers to entry that make it difficult for a new company to get off the ground and establish itself in the market. One of the main challenges is the cost and time required to put the necessary infrastructure in place, including origination, marketing, underwriting, and servicing. Additionally, there are a number of regulatory hurdles that a new company must navigate, including marketing and underwriting regulations. These regulations can be difficult to understand and comply with, adding to the challenges faced by startups.
“We’ve designed the credit card stack of the future and the momentum is strong. We plan to keep driving hard and iterating until we’re a multibillion-dollar company and an industry leader in the financial technology space.” Said by Kapadia.
The founders of Deserve recognized these challenges and may have decided to focus on a specific niche market or target population. By targeting a specific demographic such as students or young consumers who may have limited credit history, they may have been able to overcome some of these barriers. Additionally, by using alternative data and innovative technology, they may have been able to create a more efficient and streamlined process for underwriting and servicing loans.
Another challenge that Deserve faced was the difficulty of launching a new credit card. Most people don’t realize that there have only been five new credit card launches since the financial crisis, and one of those brands has already folded. This highlights the difficulties faced by startups in the credit card industry.
Despite these challenges, Deserve has managed to overcome these difficulties and has seen its product adopted by many consumers. The company’s mission to provide fair credit access to underserved individuals and small businesses, along with its use of technology to make the process of applying for and using financial products easier and more convenient, has been well-received by the market.
“So, we want to provide access to fair credit, meaning we don’t want to offer you a card that has a high interest rate and fees. We want to lead with advocacy, so we want to promote and reward good credit behavior. We put a heavy emphasis on credit education and financial literacy,” shared Kalpesh Kapadia.
“And last but not least is financial independence. If you are a young person and we help you build credit history, then you won’t have to rely on cosigners on loan applications.”
Meeting Unique Needs for Continuous Growth
Deserve’s platform is built with mobile app experience in mind, their platform provides instant issuance, wallet provisioning, card controls, and on brand user experience, making it easy and convenient for customers to apply for credit, manage their accounts, and make payments through the mobile app.
To stay ahead of the trend, the company also committed to leveraging technology to make the process of applying for and using financial products easier and more convenient for customers. The easy application process, personalized customer service, and other features that Deserve offers are all designed to make the process of using financial products as simple and stress-free as possible. By deploying technology to improve the customer experience and by providing access to credit and financial products that are tailored to the needs of their clients, Deserve aims to promote financial stability and security for its customers and help them achieve their financial goals.
Furthermore, Deserve does map a specific target market in mind, such as students and new credit users, and the company may have tailored their products and services to meet the unique needs and preferences of this demographic. For example, the company offers a student credit card that is specifically designed to help students establish credit and gain financial independence.
Deserve has been successful in securing a significant amount of funding over the course of 11 rounds, totaling $544.2M. The company’s latest funding round, which was held in May 2022, was a debt financing round that raised $250M. This shows that the company has a strong track record of attracting investment and that it has been able to secure large amounts of funding in order to support its growth and expansion.
Kalpesh Kapadia has stated: “Learn to take rejections well, because you are going to be rejected. Grit and persistence are key. Sometimes, I don’t pick up the phone the first five times a student calls me for career advice; I want to make sure they have conviction. That said, you also have to have optimism that things will work out, and they do. You have to love the journey and look around yourself to appreciate it. The outcome is just a byproduct. If you don’t love the journey, you’re not going to be very successful.”
Personally, I think serving underserved markets, utilizing technology to improve the customer experience, and staying true to a clear mission and values are quite important. By adopting these principles, companies can better meet the needs of their customers, build a strong reputation, and achieve success in the competitive financial industry.