Gone are the days when pulling an Amex out of your wallet was a status symbol – and racking up air miles seemed cool.
It’s time for a new kind of credit card loyalty program, and three Clearscore startup alumni think they have the answer.
Their new credit card startup, Yonder, comes out of hiding today.
It’s targeting professional millennials (can’t you tell from that familiar pink hue in the marketing photos?) and it’s even won the backing of Rio Ferdinand – making it the third European fintech that the footballer at the moment retreat sustained after So rare and Sokine.
Yonder’s launch is the result of a £20m seed round co-led by Northzone and LocalGlobe, with participation from Seedcamp, and an angel roster that includes The Stack World and the founder of Beautystack Sharmadean Reid, Marshmallow Founders Oliver and Alex Kent-Braham, Payhawk founder Hristo Borisov and Matt Robinson.
Ripe for change
“If you look at credit cards today, overall they’re not that different from 60/70 years ago,” said Tim Chong, CEO and one of Yonder’s three co-founders, at Sifted.
“They all do cashback or Avios points, which stem from partnerships with American Airlines six decades ago.
“Credit hasn’t been modernized to fit what we want as young consumers and what fits our lifestyle and needs.”
Cue Yonder’s “experience-based” rewards system, which is designed to “help people become a tourist in their own city,” says Chong.
Yonder curates experiences and provides content in its app that it hopes will help expats in a similar situation Chong found himself in when he moved from Australia to London four years ago. .
“If you’ve ever moved countries, you’ll know it’s really hard to find out what’s actually good to do – if you Google it, you’re saturated with hundreds of ideas,” he says.
Yonder’s list of Experience Partners is currently quite short at 20, including rewards like a free dinner for two at London restaurants Kricket and Lina, or free tickets to Sofar Sounds events.
It plans to roll out over 50 partnerships throughout 2022, but there will only ever be 6-8 live experiences in the app at any given time – to avoid this “choice paralysis”.
Credit’s response to Soho House
“We want the app to be a very high-quality product that you access for this information as well as to use your map,” Chong says.
So this is the Soho House of credit cards?
“Yeah, sort of,” Chong said. “But hopefully not as exclusive – our philosophy is that we want to make this accessible to everyone.”
Yet he ‘shamelessly’ charges a £15-a-month membership fee for the privilege.
To start with, only Londoners will be allowed in the Yonder club, but the company intends to expand to other UK cities in the near future and then to all major cities in Europe thereafter.
“Wherever people travel as expatriates for work and want to explore what there is to do,” Chong says.
Yonder is in talks with Britain’s financial regulator about launching a travel insurance product, and he may apply for a banking license later.
“You need a better way to spend, buy, save, invest and protect,” Chong says.
“We want to address all of these parts of a consumer’s financial life, but our starting point is a member relationship, rather than a banking relationship.”
Closing the credit rating gap
It’s not just young professionals that Yonder is targeting. The team really has their eye on five million “credit-blind” people in the UK – mostly expats like Chong – who moved to the country and struggled to get a credit card without a local credit score.
There, which is authorized by the Financial Conduct Authority, does not require a credit score, although it does run loose checks on customers who have one in the UK.
Instead, it uses open banking to assess credit adequacy and spending habits based on transaction data.
Yonder’s representative APR (variable) is 59.3%. This includes all fixed costs like membership, while its actual cost of borrowing is 23.94%.
By comparison, Amex’s actual cost of borrowing is 24.7%, and the variable APR of its Preferred Rewards Gold credit card, for example, is 60.1%.
But despite its personalized metal card and promise of content curation, Yonder might struggle to convince customers to get a credit card in the first place.
A growing body of research suggests that millennials and Gen Zers are particularly averse to credit. According to YouGov, of the 13 million millennials living in the UK, barely half have a credit card. And 93% of those who don’t even want it.
At the same time, this age group’s adoption of buy now, pay later (BNPL) payment services – themselves a credit product – has seen unprecedented growth over the past two years.
In the UK, Yonder’s original market, 42% of 16-24 year olds used BNPL’s services last year, mostly for fashion and technology purchases.
However, after conducting a marketing war on traditional credit products, BNPLs like Klarna and Clearpay have recently been the subject of several slaps from regulators and ordered to frame their wording around the fact that they are a clearer credit product for consumers.
Chong says there will be different.
“Misused credit can be a huge source of stress for people,” Chong says. “So we want to help customers use it well, with an application integrated in a clear and educational language.”
When the time to pay a credit bill approaches, a pop-up window will appear in the application explaining to the customer that he will not pay any interest if he pays the full amount. It will also calculate and tell them how much interest they will pay if they only pay half that month.
If the customer is only doing the minimum after a few months, another pop-up will say, “Hey, that’s not how you should be using this product.” Here’s how.”
And if you’re turned down when you apply for Yonder, that will, at least, try to soften the blow.
“How you get turned down matters as much to us as the approval because it can actually be a very severe attack on your personal finances,” Chong says.
“So in this case, our message will be – ‘it’s not you, it’s us. We’re just not ready for you yet.”
“We need to do a better job in the industry to make credit clear and easy for consumers to understand.”
Amy O’Brien is Sifted’s fintech reporter. She tweets from @Amy_EOBrien