Fintech Profile: Consumers Kick Card Anxiety and Improve Financial Health With Debitize
Credit card perks without credit card debt? That's the idea behind Debitize, a personal finance app that links credit cards to checking accounts. With every credit card purchase, Debitize transfers money out of a consumer's account to automatically pay the bill when it's due.
By effectively turning a credit card into a debit card, Debitize helps people curb overspending, increase credit scores and earn rewards without debt. It also makes it easier for debt-wary consumers, especially millennials, to stay on budget and out of debt while still using a credit card.
Debitize cofounder Liran Amrany knew staying out of credit card debt was a vital component of financial wellness, but he soon realized that by avoiding plastic, people were missing out on the benefits, ease and perks plastic provides.
"It's safe to avoid credit, but you can be too safe," Amrany said. "I knew if people could pay off the purchases as they made them, they’d have greater peace of mind and less anxiety around using a credit card.
That idea was the beginning of Debitize. The company is an alumnus of the INV Fintech Accelerator, a program that nurtures high-potential fintech startups. As the accelerator's technology partner, Fiserv helps mentor companies like Debitize, including introduction into the Fiserv Innovation Network and our client and partner ecosystem.
As part of an ongoing series of fintech profiles, we spoke with Amrany about Debitize and how it's changing the way people use and manage credit cards.
Are millennials your target market? Is that evolving as your company grows?
We know millennials are avoiding credit cards more than previous generations – up to two-thirds of millennials don't own a credit card. Millennials' reluctance to carry plastic likely stems from unprecedented student loan debt and anxiety caused by watching their parents' struggles with debt, especially during the financial crisis.
Younger people also tend to be more comfortable connecting their accounts online than older generations. They're more apt to trust technology – and likely have several apps already linked to their accounts.
So, yes, Debitize started with a focus on a younger demographic. But we now have people of all ages on our platform. Debitize is appropriate for anyone who's budget conscious and wants to get a better handle on their spending without giving up the benefits and perks of using a credit card.
What role do fintech tools like Debitize have in building good financial habits? Has the desire for financial health been part of your success?
Being debt free is an aspirational goal for so many millennials and we want to make it in reach. There's no shortage of information and advice to help people manage money, but we think automation can have a bigger impact. Debitize automates good financial habits without requiring significant changes in behaviors. With new developments in artificial intelligence, there are opportunities for automation to influence other financial behaviors, such as saving and paying bills.
Debt is a four-letter word for many people. They may feel anxiety knowing they owe money on their credit card and that there's more than a small chance they could lose track of their spending. In addition to paying off new purchases every month, we offer a tool that helps people pay down debt over time. We're not just focused on lowering the rate paid on existing debt, we want to help people get out of debt in a reasonable amount of time – and stay debt free.
When the market turns – and it will – we want people to be in a good spot. If you're in a lot of credit card debt and lose your job or have to take another job at a lower salary, you can end up in an endless cycle that can disadvantage you for years. We want people to spend responsibly and save money, rather than find themselves in debt that they can't pay off.
How would you work with issuers and financial institutions?
Debitize is currently only offered directly to consumers, but we've gotten interest from several credit card issuers, including one that is planning to move forward with a pilot. When offered through financial institutions, a consumer would simply turn on Debitize for a particular credit card. Then money would move out of the consumer's account to cover purchases as they're made. The bank or credit union would benefit by being able to attract people, primarily millennials, who are otherwise leery of using credit cards. Financial institutions could consider approving cardholders who would otherwise be declined – if they agree to use Debitize to help make them less likely to overextend themselves or miss payments.
And, of course, the more a bank or credit union's card is used – the more it's top of wallet – the more a financial institution becomes the hub for finances. Providing a first credit card and empowering its proper use gives financial institutions a leg up on other future banking relationships.
How is Debitize changing financial behaviors?
Debitize has covered more than $25 million in credit card spending so far. People tell us they've paid off thousands of dollars in credit card debt, increased their credit scores by triple digits and taken amazing trips with the credit card points they've earned. The results have really been gratifying.