The news: Secured credit needs to move from niche venture to scalable growth pathway, Galileo senior product management director Shankar Pandravada told PYMNTS. 

Secured credit is “the first rung of the ladder” for issuers trying to serve the roughly 45 million underbanked and underserved consumers in the US, per senior PYMNTS writer Austin Prey, while also managing risk. 

Why this matters: Secured credit can act as a gateway to a deeper lifetime customer relationship. These cards can lock in customer loyalty to their issuer—especially for US adults with scarce credit opportunities. 

Fintechs are following this exact blueprint, filling in the gaps where issuers have pulled back:

• OnePay debuted the Builder Card, a secured credit card that mirrors a debit experience.
• Chime rolled out its Chime Card, a secured credit card with no fees or interest that self-locks for cardholders who don’t pay their statement balance on time. 

Implications for issuers: Fintechs are amassing consumers who want access to credit. For instance, Chime reported 19% growth YoY for active consumers, per its Q1 earnings. As these competitors grow in size, incumbents risk losing ground in other key areas, like prime consumers and deposits. 

To avoid losing these consumers, issuers need to demonstrate the value of traditional banking. Introductory credit cards for young adults need to beat fintechs’ secured card rewards with richer cash back categories and card-linked installment offers. 

Strong differentiation from secured credit can help issuers establish superior value and lock in younger consumers for lifetime relationships, including unsecured credit cards, home and auto loans, and wealth management.

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