The Big Idea: Tomo Credit
I was fortunate enough to always have friends from all over the world. I spent most of my childhood growing up in Tokyo and attending the American School in Japan. I was your quintessential third-culture kid. I played basketball throughout Asia in high-school, went to NYU (meeting more friends that grew up internationally), worked internships in a few different countries, and finally settled in New York. Many of my friends in the city weren’t US citizens. One particularity that I never appreciated fully… was how difficult it was for my friends that immigrated to the US to get a credit card. I personally know multiple people from very stable backgrounds that could not get credit when we were students together. They applied and were unsuccessful in getting any credit access.
This isn’t a unique problem — according to analysis of the consumer financial protection bureau’s statistics, 76% of GenZ and Millennials have not built up a credit history. This means that they would not have access to loans from traditional financial institutions that require at least a credit score with some credit history to even be considered. These lending policies stop ~40 million people from getting access to loans.
Enter Tomo credit. This company was founded with the intention to bring millions of people into the financial system and better position them for future loans. Kristy Kim, one of the co-founders of Tomo credit, faced similar problems herself that Tomo aims to fight. When she first came to the US as an immigrant, she couldn’t get qualified for an auto-loan despite being employed and having a positive cash flow to cover the cost. She aimed to fight this problem and came up with a solution. She developed Tomo credit, a credit company that was founded with students, immigrants, and those with lower credit scores in mind.
How does it work? Tomo requires no credit history, has 0% APR, no fees, and you can be approved for an account with a credit limit of up to $10,000. Tomo links to your debit account and is setup with an auto-pay feature to clear the balance once a week. This will build up your credit score over time as this card reports to all three credit bureaus. The card is partnered with Mastercard and can be used anywhere Mastercard is accepted. Not only that, but you also get 1% cash back on all purchases. This card is the perfect avenue to spend and build up your credit profile.
The company generates revenue by charging a small fee to merchants on transactions. Eventually in the future, the company plans to add more variety to the spending rewards as the customer base grows. While traditional financial institutions do have cards for those with lower credit scores, most still do have some credit history requirements and minimum benchmarks. They often limit what you can purchase and give minimum spending freedom. Traditional financial institutions aren’t taking the same consumer risks that Tomo is taking in allowing for this card nor are they creating opportunities for consumers to build up their credit profile.
The value proposition of this company just makes so much sense to me. The co-founders saw a unique problem that they themselves experienced and came up with a solution. The market for this card is very size-able with Tomo being a perfect fit for immigrants, students, or those with low credit scores. The amount of people that don’t have access to credit is vastly under-appreciated and Tomo provides an immediate solution. The product is easy to get access to, easy to setup, and even offers a cash-back feature on all purchases. I see Tomo continuing to grow in the future, offer increasingly exciting rewards, and develop credit of our friends and neighbors who have been unsupported by the tradition financial system.