Once-promising credit card targeting an underserved audience was slowly dying.
April 10, 2024 – Empower Finance announced yesterday an agreement to acquire the fintech credit card company Petal, which had fallen on hard times after a promising start.
Petal initially targeted new-to-credit customers, offering them the potential for credit card approval without an existing credit score. (Petal used its own formula for approval based on customers’ incomes and banking histories.) Over time, Petal introduced new cards that targeted customers with past credit problems.
Promising Start But Profit Problems
While Petal says they opened over 400,000 credit card accounts, the company’s financial picture got cloudy. In June of 2023, Petal angered many customers by forcing them to make an unhappy choice: start paying an $8 per month fee on a credit card that previously had no annual fee, or have their accounts closed.
It was never clear why Petal chose this ultimatum, but it definitely suggested a company that was in trouble and in need of new revenue sources.
Then, in November of 2023, Fortune reported that the company was up for sale, with the 100 or so remaining employees keeping only the most basic operations up and running.
Will Petal Survive In Any Form?
It is unclear what Empower Finance will do with Petal. Empower’s business up to this point has focused on small cash advances and lines of credit for people with lower credit scores. If the Petal name continues to exist, it seems likely that the focus will be on the credit cards targeting bad credit customers who are willing to pay an annual fee.
In essence, Empower gets a basic credit card infrastructure that is already built instead of attempting to start one from scratch.
It is possible Empower will do something surprising to revive Petal’s initial promise. However, this feels more like the sad ending to a card with an enviable mission but a business model that couldn’t support it.
Author: Adam Jusko