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Zero raises $20 million from NEA and others for a credit card that works like debit

Just ahead of the launch of the Apple Card, a startup that has its own take on modernizing the credit card industry, Zero, is announcing the close of its $20 million successions A. The brand-new circular of funding was led by brand-new Enterprise Associates (NEA), and brings Zero’s total raised to date to $35 million, including both equity and debt funding.

Other investors in the circular include SignalFire, Eniac Ventures, Nyca Partners and some unnamed school endowments. Zero had previously announced an $8.5 million lift in plummet 2017, led by Eniac, and had raised $7 million in escapade debt from Silicon Valley Bank.

Zero has a clever concept that targets millennials’ hesitance to sign up for credit cards.

Today, only 33% of millennials have a major credit card, a Bankrate survey found — largely because they’re wary of falling into the vicious debt cycle. Instead, this younger demographic often only carries a debit card. But that also means they’re missing out on credit card benefits — like points, rewards and cash back.

Zero’s concept is to offer a rewards credit card that works like debit.

The Zerocard itself is a world Mastercard, so it earns credit card cash back. But unlike a traditional credit card, it’s combined with a fdic-backed checking account named
Zero Checking. That means Zerocard and Zero Checking work together in the app, allowing cardholders to see one net number they can disburse from.

That route, they won’t make the mistake of accidentally going over budget, as is often the case with traditional credit cards, which then advantage from charging interest on the unpaid balance.

Zero co-founder and CEO Bryce Galen says he had always liked optimizing his personal finances, but didn’t see the value in overspending to pursue rewards.

“People disburse 10 to 15% more on average just because they’re putting it on a credit card, and not seeing where they stand all the moment,” he says. “Spending 10 to 15% more to pursue 1 to 2% in rewards doesn’t make sense.”

Plus, he adds, “half of all credit card points are never even redeemed.”

With Zerocard, the company does away with other credit card annoyances as well.

Zerocard doesn’t charge annual fees like many traditional credit cards do. And Zero Checking doesn’t add any extra ATM fees beyond what the ATM possessor charges. It also does away with foreign transaction fees, minimum balance fees and overdraft fees — like many of today’s challenger banks.

Meanwhile, the Zero app is built with an eyeball toward what makes apps superb.

Galen, who led product development for Zynga’s “Words with Friends” has experience in this department, while co-founder and COO Joel Washington previously co-founded vehicle sales mart Shift. The executive faction, combined, has backgrounds that include moment at Affirm, Apple, Capital One, Dropbox, Google, Postmates, Silicon Valley Bank, enhance and Wells Fargo.

Overall, Zero’s design feels clean and uncomplicated, compared to the cluttered and dated apps from traditional banks. It has smart features, too, like a detailed transaction view that shows the vendor’s logo and area on a map to make it easier to recognize purchases.

“Zero creates an innovative debit-style experience, with an elegant design, and truly intriguing rewards. It’s a fabulous banking experience,” said Hans Morris, managing partner of Nyca Partners and former president of Visa, Inc., in a statement. “Few people understand how complex it is to launch either a credit card or a checking account app, and I believe Zero is the first U.S. startup to launch both,” he said.

Zero launched in November 2018, but only to a tiny number of customers. Though officially open for business, it was functioning more like a public beta — though it didn’t call it that at the moment. Meanwhile, its waitlist continued to grow.

Today, there are still 204,000 people waiting to be allowed in — something that Galen says is now going to happen.

“We haven’t launched to everyone on the waitlist yet, but we expect to within the next few weeks,” he says.

Another intriguing zigzag on traditional credit cards is Zero’s route to card upgrades: it encourages but also rewards customers for telling their friends. By doing so, customers achieve access to better-looking cards and higher cash-back percentages.

Zero customers commence with a “Quartz” card gifting
1% back on purchases. When a buddy they refer joins, they collect a higher-level card named
“Graphite” that offers 1.5% back. Two friends earns you the “Magnesium” card with 2% back and four friends gets you the “Carbon” card with 3% back. The Magnesium and Carbon cards are also hard metal, capitalizing on the millennial trend of wanting their cards to look cool. And metal cards are in particular require.

To collect the full cash-back rates, customers have to pay their balances in full by the due date, Zero says.

The company has partnered with Salt Lake City-based WebBank to issue the card, and deposits are held at Memphis-based Evolve Bank & Trust, a fdic member. Zero makes cash primarily on interchange and interest on deposits.

While some users may leave balances on the card that generate interest, Zero isn’t focused on that aspect of the business for revenue aeon.

“Most companies in fintech today are launching undifferentiated debit cards as a feature or continuance to their product for an extra engagement and monetization stream,” says Rick Yang, partner at NEA, as to why he invested.

“Zero is completely focused on their card programs and construction a differentiated solution that actually provides a value proposition that resonates with consumers. We’ve also been fascinated by the growth of debit outpacing credit, and we think that our solution gives consumers the best of both worlds,” he adds.

Zero is currently iOS-only, but is working on a robot model that is expected to be prepared in August.


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