Deserve, a Silicon Valley startup that helps other companies launch and manage credit cards, is facing challenges due to slowing business and difficulties in securing funding. The company, valued at $500 million in 2021, has been in talks with investment bankers about potentially selling itself as well as exploring strategic partnerships and investment opportunities. Deserve, backed by investors such as Goldman Sachs, Visa, Mastercard, and Accel, is not profitable yet and burned through significant funds in 2023, but CEO Kalpesh Kapadia remains optimistic about the company’s growth prospects in the coming year.
The company, founded in 2013, initially focused on consumer credit cards targeting immigrants and students but shifted its business model to help other companies launch credit cards after partnering with student loan bank Sallie Mae in 2018. Deserve now assists companies in all aspects of launching a credit card, from assessing borrower risk to handling customer service. Despite its pivot, the company continued to operate its consumer card business, which has now taken a hit due to challenges such as the collapse of its largest customer, crypto lender BlockFi, and the closure of other fintech clients like GloriFi.
Competition in the tech-enabled credit card issuing space has intensified, with companies like Marqeta entering the market to compete directly with Deserve. Marqeta recently announced the acquisition of Power Finance, a potential rival to Deserve, for $275 million, signaling its intent to expand into the credit card business. Deserve currently has 15 customers, including fintech companies like M1 and banks like Customers Bank, as it navigates the challenges of a changing fintech landscape and growing competition.
Deserve’s focus on credit card issuing and processing for other companies has positioned it uniquely in the credit card ecosystem as it aims to differentiate itself in the market. The company recently sold its balance sheet of credit card loans to a private equity fund, improving its gross margins but resulting in a decline in revenue. Despite these changes, Deserve is confident in its ability to survive through 2025 and reach break-even by then, with plans to continue expanding its customer base and offerings.
While some fintech companies have faced regulatory challenges and a slow pace of growth in the consumer lending market, Deserve remains optimistic about its future prospects and its ability to navigate the evolving fintech landscape. The company believes it is well-positioned to continue serving its customers and adapting to changing market dynamics, particularly as it focuses on building a profitable and sustainable business model. Despite the challenges faced by fintechs in the lending space, companies like Deserve are working towards innovation and growth in the competitive industry.
