- Your credit score can make
or break your quality of life.
The difference between 500 or 850
can impact your ability to borrow money,
land a job, lease a car, or buy a house.
It's crazy to think this set
of three digit numbers can divide Americans
into two categories, worthy and unworthy.
Access to affordable credit isn't given
for over a hundred million people in this country.
Over 60 million people have credit scores below 700.
Founded in 2016 in San Francisco,
Empower is a startup we funded that's on a mission
to help everyday Americans access credit
and build positive credit history.
And they're doing it without considering
credit scores or requiring security deposits.
We're lucky enough to be early investors
in this company led by former
Sequoia investor Warren Hogarth.
Let's get started.
(upbeat music)
Have you ever wondered why the vast majority
of people around the world
don't have access to credit?
- If you take the US population,
it's about 250 million consumers
and 100 million people lack access to credit.
We've shown that we can underwrite
about 50% of people who don't have access today.
So that would basically elevates
another 50 million people into the financial system
and gives them a way to also build their credit score,
which then is really important
not just for accessing credit,
but it's for your ability to rent,
your ability to get car insurance
in a number of states, and in many states
are still part of your job application.
So I think we're still in the very early innings
of really democratizing access to fair credit.
- The credit score was first introduced
in the US in 1989 by a company
that was then called Fair, Isaac and Company, aka FICO.
It was created as a way for lenders
to gauge your credit risk.
Basically, how likely are you to pay
your bills on time and decide
whether or not to give you credit
and what the terms will be,
including the interest rate you'll pay to borrow money.
You may have heard of the three main
national credit bureaus in the US,
Experian, Equifax, and TransUnion.
The problem with the system
is millions of Americans
are either credit invisible or unscorable.
- There's about 45 million people
in the country that are credit invisible or unscored.
And then on top of that,
about 34% of people have found
errors on their credit report.
And so you've got to remember that
this credit report isn't just used for lending.
It's used for determining
whether you can rent somewhere,
it's used for determining your ability
to get car insurance or even in job applications
in many states still in the country.
So one of the most important reports
that we have with millions of people
don't have a report and a third of us
have errors on our report.
- We all know credit scores range from 300 to 850.
The higher your score,
the more likely you are to enjoy access to credit
in greater amounts and at a lower cost.
But credit scores influence
a lot more than the loans you can get
and the interest rates you pay.
- If we look at the people that we're impacting today,
it's disproportionately minorities,
people of color, and actually over 60% of the people
who use Empower or get access today are women.
These are all people who are being
shut out of the system and they're using it
for really important things to make life work.
We have customers reach out to us
about how it's Friday, something happened,
like the paycheck didn't come
when they were expecting it.
They're at the gas station.
They don't have money to put fuel in the car
or you're at the supermarket aisle to checkout,
you've got your kid in the trolley
and you can't pay for that food right there.
And then so the ability for someone to believe in you
and be willing to provide you access
and do that instantly so that you can make life work
and you don't experience that hardship
is sort of one of the key value propositions
of what we provide.
- And if the stakes weren't high enough already,
the credit systems limited in its coverage
and credit reports aren't always accurate,
making it hard for many people
to get access to affordable credit
or any credit at all.
- Providing access to credit is critical,
'cause it provides social mobility.
If you're in a developing economy,
you need money to make money effectively.
You need it for your ability to get education,
your ability to buy a fertilizer
or a computer or get your store going.
And so it is vital to creating
social mobility and prosperity.
We're at this unique point in time
in history where in most of the world,
there is no credit score,
but the good thing is we're not going to need it.
We can score people based on their banking data,
their payroll data, and most people now
also a digital wallet.
If you're a Gojek driver in Indonesia
or an Uber driver somewhere,
you are now getting paid,
doesn't even have to be a bank account,
into a digital wallet
and that income and how you use that money
can form the basis of a credit score
and a way for you to access capital
and then create that finance,
that social mobility, which is critical.
- [Garry] And that's what Empower's doing.
- Yes, we are solving access to credit.
- We're excited about Empower
because it proves that software
has the ability to change the trajectory
of your financial future
and financial freedom in real time.
What's really special about Empower
is they effectively bootstrap people
into having credit and building credit
just by using the data provided
by digital wallet to make an instant decision
on whether you can get access to credit.
Warren was actually inspired
to start this company because of what happened
to his parents during the 2008 global financial crisis.
- My parents were relying on financial advisors
for their retirement.
And to save, they'd worked very, very hard
through their lives to get ahead.
The global financial crisis came along
and wiped out over 50% of that net worth overnight.
And that was one of those moments for me
that they'd gotten really bad advice.
And now I'm sitting in Silicon Valley
and it's like software
should have been able to solve this problem.
Everyone should be able to get access
to good advice, good financial advice
and information to make the right decisions.
And it just, it really hit home for me
in that period where overnight
something like that could happen to them.
It can happen to anybody.
- We were believers in Empowers mission
from the beginning and we are proud
to be an early investor today.
They've got it all.
Rich insights, machine learning
through alternative underwriting
and universal payment rails.
Empower can better assess an individual's true
financial responsibility,
meaning more people will have a fair shot
at obtaining good credit.
- At Empower, our mission is really to solve
access to credit to provide
that social mobility for folks.
We've done that here in the US.
We've proven that we can provide access to credit
to about 50% of the a 100 million people
who lack fair access today.
And now we're focused on taking that internationally.
How do we underwrite the next billion people?
And we can do that because we've shown
that we can underwrite in real time
based on these new banking and data sources
and we've now got the financial rails
to be able to instantly provide people
access their credit.
(upbeat music)