A new entrant has emerged in the non-prime credit market, offering cards to consumers who don’t meet the underwriting standards of traditional issuers. While this segment has historically posed challenges for mainstream providers, Tilt uses a proprietary scoring mechanism aimed at identifying creditworthy individuals within this group.
The cards are a relaunched version of an unsecured cash back lineup, originally issued under the name Petal to expand access to fair credit. Empower, now operating as Tilt, acquired the Petal portfolio in 2024.
“Many have tried, but few have succeeded in addressing the sub-prime credit card segment, so it will be interesting to see what Tilt will bring to the market,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The risks are high, the margins are thin, and the potential to expand is limited.”
Proprietary Credit Analysis
WebBank will continue to be the issuer of the cards, and Petal’s cashflow-based underwriting technology will remain intact. As with the Petal cards, the issuer can choose to use a proprietary algorithm that may consider factors such as income, savings and spending—in addition to FICO scores—when determining creditworthiness.
This presents a risk, as traditional credit scoring in the U.S., led by the FICO score, has been highly predictive of losses, which underpin the business revenue model. For customers with subprime credit scores, particularly those below the 660 cutoff, issuers must contend with a segment that is especially vulnerable to economic downturns.
A Dangerous Market
If unemployment rises or business revenue declines, this group feels the pinch first. As a result, mainstream issuers have priced these customers higher to ensure that loan-loss reserves and revenue models can absorb the potential risks. This may limit Tilt’s ability to penetrate the market.
“With Tilt’s focus on subprime accounts and the incremental risk involved, we expect they will face some headwinds, as did Petal with their cashflow model,” said Riley. “There is room for companies to address this segment, but they must consider the business model and risks involved with lending.
“And they must think of the comprehensive needs of their customers in the same manner as top banks,” he said. “They need to consider product features that build savings and net worth, address financial needs beyond just credit cards, and consider ways to weight their investments in retail lending, with additional products such as secured auto, BNPL, and the like.”
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