Westwood-based fintech company Sunbit is making headway in the payment card industry by introducing its no-fee credit card to buy-now, pay-later firms like Klarna, Affirm and Sezel.
In addition to standard credit card features, the Sunbit card offers a personalized APR for approved users and allows them to pay individual transactions in full or on three-, six- or 12-month payment plans. There are no annual fees, application fees, late fees or penalty fees – nor are there fees to add or remove transactions from the payment plan at any time. The card is managed through the company’s MySunbit app.
“I think we’ve got the best of all these different (payment solutions) in one card with no fees and a mobile app that does all the heavy lifting for you,” said Bill Walsh, SunBit’s chief customer officer. The card is powered by Utah-based TAB Bank. Issued under license from VISA.
So far, Sunbit Card has onboarded more than 65,000 early access cardholders and has 400,000 more consumers on its invite list.
Sunbit has a point-of-sale lending option available at approximately 14,000 locations nationwide, including businesses such as auto dealership service centers, optical practices, dentist offices, veterinary clinics and specialty healthcare services.
However, the company has a lot of ground to cover, according to Chief Executive Arad Levertov, who said Sunbit’s goal is to expand adoption of its cards. According to a report by finance analysis website pymnts.com, the United States business market was comprised of approximately 29 million small and medium-sized businesses in 2020.
“There’s a large merchant base and Sunbit has a small market share,” said Dave Maddox, a payments industry consultant at independent payments consulting firm ThinkPayments and a retired business development leader at IBM. “They’re targeting the subprime marketplace, which is an underserved market, of course.”
Maddox added that buy-now-pay-later (BNPL) services and companies gained significant traction during the pandemic, when card users in the subprime category were out of work and unable to qualify for credit cards. Since then, BNPL transaction volumes have plummeted, with companies like Affirm losing more than 75% of its value as of this February. Affirm’s stock trades at around $35 these days, up from late last year, when its stock was trading at more than $160 per share.
“The way (Sunbit is) targeting seems good to me, at least they’re focused on individual segments where the subprime consumer gets into trouble and needs some financing,” Maddox said, using auto shops as an example. One place where consumers may run into unexpected financial problems can be helped by Sunbit’s offerings.
Filling in the blanks
The Sunbit card took more than two years to develop, according to Walsh, who said the company spent significant time researching what gaps its card could fill in personal finance.
One issue found in Sunbit’s research was that more than half of the customers in the study had multiple checking accounts used to handle various purchases.
“I think when we started seeing these common themes with the personal finance life hacks that clients were doing to make it all work, it inspired us to go down that path and feel like we were on to something,” Walsh said.
However, Walsh added, a bigger challenge awaits Sunbit if it is to grow its card user base: reimagining how cards work in an industry that relies on card-based legacy technology that consumers are familiar with.
“They have to get consumer demand, educate consumers and make sure people are comfortable with the app,” Maddox said. “And they’re competing against PayPal, they’re competing against some (firms) with real name recognition like Klarna.”
According to Maddox, convincing consumers is only one piece of a larger puzzle. He said it will be a challenge to successfully push the product to merchants over competitors, as it is likely that merchants will stick to a single finance solution while juggling multiple platforms from different companies.
The way Sunbit structures its merchant agreements, which are detailed and detailed documents, will also be a determinant of how successful the company is in persuading merchants to adopt its services, according to Maddox.
Maddox said that if he were to invest in the company, he would want to better understand Sunbit’s projected loan losses, current loan losses and how it plans to bring more traders on board. “They’re going after the subprime marketplace with credit cards, which makes it more challenging to understand what (their) potential loan losses could be,” Maddox said.
Levertov said Sunbit’s advantage is that it has accumulated a lot of data over the past six years of trading. “There’s always a challenge when you provide credit, but we’re confident in our ability to scale it and overcome it, because that’s what we’ve been doing for years,” Levertov said.