Qualifying for a credit card isn’t easy when you have a bad credit score or none at all, but Los Angeles-based financial technology company Arro wants to help consumers increase their line of credit while teaching them why it matters.
This kind of thing is not new; just look at Kikoff, Upgrade, Self Financial, Altro, Petal, X1 or TomoCredit. However, from Arro’s perspective, traditional lenders are calling on their bottom line, which doesn’t involve helping its customers stop the cycle of overspending or going into debt, said Ryan Duitch, co. -founder and CEO of Arro, to TechCrunch.
Duitch started the company with Luke Pelullo in 2021 to provide a credit card and credit origination platform that has a proprietary underwriting model that, instead of relying on the FICO system, relies on income ; for example, earning at least $1,000 per month in income. And, it got a partnership with Equifax, so applying for an Arro card has no impact on someone’s credit score.
With Arro, for $3 a month, customers get access to features like account monitoring and expense tracking tools. The company also earns a small percentage of revenue from interchange fees when a customer uses the credit card.
This is also combined with financial literacy training and behavioral incentives. As the customer progresses through in-app activities, such as learning to use credit responsibly and creating and achieving budget and savings goals, there are additional rewards like increases in the line of credit.
The idea, Duitch told TechCrunch, is from day one to be able to increase your line of credit by $20 or $30. Then in six weeks by another $100 and other quick successions for the first five months.
But don’t call Arro a credit company, Duitch said. Instead, he called the startup “credit noom meets personal finance.” While other financial apps help alleviate short-term symptoms of debt, they also charge high interest and fees, he added.
“We are here to shake up behaviors and show that the system is broken for so many consumers,” he added. “We’ve created a handful of modules that train you in all the basics of what you need to know, and by layering them with actions and behaviors, like budgeting, you get people to do something to spend less and save .”
To maintain the content cascade, Arro partners with university professors on curriculum and behavioral sciences. The goal is to be able to provide some expertise on how the company introduces its newest financial literacy variable into the underwriting equation.
Arro is still in its early stages – it’s gearing up for a launch this month after beta testing with “a handful of different customer groups”. Duitch declined to say how many are on the waitlist, but said its launch partners will put the app in front of around 5-6 million target users.
It also closed $10 million in seed funding in a round led by Crosslink Capital. He was joined by a group of investors including Bling Capital, Bam Ventures and Global Founders Capital. The company also has $75 million in loan capital.
Most of the equity financing will be used to get the product into service, work on operations, build the team, develop the technology and have the right amount of lead to support customers, Duitch said.
“For our first customers, we used some of our own money to help build the model,” he added. “As we train the model with data, we use a handful of our own money and then debt to lend to our consumers. After funding both operations and technology, we will then make investments in a handful of areas that will help us get there.