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Deserve, a Silicon Valley startup focused on helping companies launch and manage credit cards, is facing challenges due to a slowdown in business and a tough funding market, exacerbated by issues in the crypto industry. The company, valued at $500 million in 2021, is now exploring strategic options, including selling itself. Founder and CEO Kalpesh Kapadia has stated that the company is not for sale, but they are open to discussions around commercial partnerships, investment, and mergers and acquisitions.

Since its founding in 2013, Deserve has raised $150 million in equity funding but is not yet profitable. The company burned through roughly $15 to $20 million in 2023, with plans for strong growth in the coming year. Industry experts believe that Deserve may not fetch its peak 2021 valuation if sold, as most fintech valuations have decreased, and the company faced challenges after losing a major customer in the crypto lender BlockFi.

Kapadia, originally from India, founded Deserve after years of experience in finance. The company initially focused on consumer credit cards aimed at immigrants and students but pivoted to help other companies launch credit cards after partnering with Sallie Mae. Deserve provides a full-service platform for launching credit cards, handling everything from assessing borrower risk to customer service. Despite facing setbacks with bankruptcies among its fintech customers, the company continues to forge ahead with a focus on serving both fintechs and banks.

Competition in the tech-enabled credit card industry has been intensifying, with companies like Marqeta entering into the space. Marqeta recently acquired a credit card issuing startup and has started competing directly with Deserve for credit card business. Deserve sold its balance sheet of credit card loans and now solely focuses on credit card issuing and processing for other companies. With enough cash to survive through 2025, Deserve aims to reach break-even by then.

While Deserve has not been affected by regulatory scrutiny of partner banks as other fintechs have, it still faces challenges in making a significant impact in the U.S. consumer lending market. Despite its industry-leading technology stack, the complexity, fraud risks, capital requirements, regulations, and difficulties in lending to lower-income customers make consumer lending a tough market for fintechs to penetrate. However, Deserve remains optimistic about its future prospects and is focused on continued growth and success in the industry.

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