FinTech: Ex-Citi, Comcast execs raise $100M for Ollo MasterCards

Ollo Experian
Experian, the credit-rating agency, classifies Delaware-based Fair Square Financials Ollo credit cards as targeted to borrowers who lack “perfect credit.” Fair Square says its customers are “middle class.” Wall Street and a former Comcast executive have pumped at least $300 million into the firm since 2016.

Fair Square Financial LLC, the two-year-old, 50-worker Wilmington company that markets the Ollo credit card, says it has raised $100 million more from Orogen Group, the New York investment firm headed by former Citigroup CEO Vikram Pandit; Atairos Group, headed by former Comcast chief financial officer Michael Angelakis; and others.

Fair Square, which has lent MasterCard holders about $400 million since early last year (using the Bank of Missouri’s lending powers), is one of a string of software-intensive lenders and financial service firms that have sprung up in Wilmington in recent years, capitalizing on the area’s concentration of credit card managers and workers.

Pandit said Ollo’s “superior underwriting” and its “latest data and machine learning technology” give it an edge in lending to middle-class Americans, in competition with the handful of big banks that dominate MasterCard and Visa, the main U.S. credit card networks.

Ollo’s Rewards MasterCard charges borrowers almost 25 percent a year, and gives them back 2 percent of purchases as a premium. The Orogen investment “validates our business strategy and management team,” said Rob Habgood, the former Capital One and Bank of America executive who is now chief executive of Fair Square, in a statement. He said the new money would keep the company growing.

JPMorgan Chase & Co., Bank of America, Barclaycard, Capital One, Citi, Discover and other card giants have operations in the Wilmington area, which 20 years ago was home to the nation’s largest independent credit card lenders, the former MBNA, First USA and Advanta banks.

After the industry’s consolidation and the 2008 financial crisis, card lending declined, then rebounded sharply in the mid-2010s. Card loan growth at the largest banks has slowed lately and loss rates have been rising, according to consumer banking analysts including Michael Rose at Raymond James & Associates and Sanjay Sakhrani at Keefe, Bruyette & Woods.

Besides Pandit, the veteran hedge fund manager who headed Citi during the financial crisis of the late 2000s, Orogen’s backers include Atairos, of Bryn Mawr and New York, whose previous investments include bowling-alley chain Bowlero, arena manager Spectra Experiences, and once-high-flying online discount provider Groupon. Orogen managing director Ruchi Madan and general counsel David Caplan are joining the Fair Square board as part of the deal.

The newest cash infusion was also supported by the Pine Brook investment firm. That New York firm, headed by investment bankers Howard H. Newman and William Spiegel, helped raise $200 million to start Fair Square two years ago.

Fair Square is one of the constellation of small, tech-oriented finance firms that have emerged in Delaware since the recession. Leaders hope to gain recognition for the area as a “fin tech” center for investors, engineers and lending staff, said Jeffrey Meiler, chief executive of Marlette Funding Corp., a Fairfax, Del., company that makes loans under the Best Egg brand, in a recent interview at his Concord Pike office on the highway from Wilmington to Pennsylvania.

Like Fair Square and Ollo, Marlette and Best Egg say they are targeting Americans who have middle-income jobs but may not have the perfect credit or the time to apply for traditional bank loans and lending products. Marlette is larger than Fair Square; the company employs about 120 and plans to grow to more than 200 over the next year.

Other Wilmington-area fin tech companies include small-business lender Swift Financial, a FirstRound Capital- and Sutter Hill Ventures-backed firm founded by Delaware banking-tech guru Ed Harycki and purchased last year by Silicon Valley electronic-payments leader PayPal, which has kept an office and engineering group in north Wilmington; College Ave., the private student lender founded by Sallie Mae veteran Joe DePaulo and backed by longtime Sallie Mae boss Al Lord and by Comcast Ventures; and Epic Research, the marketing advisory firm headed by First USA alumnus Jim Stewart, which counts Apple among its clients.

The firms have grown so fast that it’s been a challenge to find enough young tech workers to staff up, Marlette’s Meiler told me earlier this year. He estimates 30 percent of his staff commutes from Philadelphia.

Wilmington’s compact downtown has suffered from cutbacks at the DuPont Co. and other major employers. Property developers led by Wilmington’s Buccini brothers are building a string of new and repurposed apartment complexes in the city center and its northern suburbs, where rents are lower than in Philadelphia’s hottest neighborhoods, in an attempt to attract recent grads from Drexel, the University of Delaware and other tech-oriented schools, as well as empty-nester veterans of the Wilmington credit card banks, to work at fintech firms and other emerging employers.