Ubiquitous and flawed

Credit cards are the dominant form of consumer credit in the United States: $3 trillion a year in spending and $150 billion a year in revenue. They’re fundamental to the everyday financial lives of more than 100 million people, and yet, the credit card industry is widely disdained, with negative net promoter scores and billions of dollars of late fee revenue.

The industry is also highly commoditized, with banks in a bidding war, offering consumers higher and higher rewards and signup bonuses, and spending more and more on marketing to them. It’s not uncommon for a bank to spend more than $1,000 to originate a single customer. These massive customer acquisition costs have to be paid by high interest rates and fees later in the customer journey.

Startups have entered the space to address these issues, but no new credit card company has achieved meaningful scale since Capital One in the 1990’s. Startups competing directly against big banks don’t have the capital to finance enormous customer acquisition costs, and thus can’t get to the scale required to be economically viable.

An opportunity for improvement

Cardless is approaching this industry from another angle, by building a platform for brands to quickly and easily launch digitally-native, transparent, and consumer-friendly credit card products to their customers.

In the complex world of payments, building a new credit card is extremely challenging, and the existing partners and products are built around net interest margins, not consumer / brand engagement. Yet, these “co-branded” credit cards are big business: $1 trillion in transactions and $50 billion in revenue last year, and growing in overall share.

How it’s going so far

My co-founder Michael and I got started in March 2019. We spent much of the first year simply researching this market to see if it was possible to build something that would succeed. We talked to hundreds of brands, as well as fin-tech executives, banks, credit card networks, and consumers.

In our second year, we raised about $12 million of funding, grew our team to 20 full-time employees, signed partnerships with MasterCard, First Electronic Bank, and a few massive internationally renowned sports teams. As of March 2021, we’ve launched our first product: a credit card offered in partnership between us and the Cleveland Cavaliers. We’ve even been featured in Bloomberg and mentioned in the Wall Street Journal. We’re proud of what we’ve built so far, but want to do so much more. Which brings me to Design.

Design at Cardless

The opportunity

One way we like to think about design at Cardless is on a two-dimensional graph: the X-axis is how useful a product is, and the Y-axis is how loved it is. Products in the top right corner are both loved and useful: we call it the promised land. Think of a product that you use every day—one you would wholeheartedly recommend to your friends. That’s the promised land.

Today’s credit cards are in the bottom right corner. They are extremely useful, but also universally disliked. Our challenge is to move them up on the graph, make them safer and more loved without making them less powerful.

We’re lucky to be supported in this effort by a business model that allows us to focus on engaging customers and brands, instead of maximizing interest and fee revenue from each customer. This aligns our incentives with those of our users and the brands they love.

If you’ve made it this far, you probably have realized that our business is complicated. The design challenges we face are complex and unique too—and I’d like to share more about a few of them.

Challenge #1 - Managing consumer irrationality

Anybody with experience with financial products knows that humans often do weird things when it comes to money. Weird, irrational, self-destructive things.

There’s a great book by Morgan Housel called The Psychology of Money. It chronicles the complex and pervasive fallacies that humans fall into when it comes to our money. Making products that touch money takes unusual empathy, human-centeredness, creativity, and respect. Do those characteristics sound familiar?

Those are the characteristics of any great designer.

A designer working at Cardless has to interrogate the dismal, disappointing status quo of the consumer credit card space in the US and at the same time, conceive of a far off future where credit cards can bring dignity and control. They must hold that dream in their mind while creating the next iterative step on the way there, as we go from our MVP to version 2.0, and then 3.0, and so on. Without human-centered design in the room we can’t make the right decisions for our brands, our customers, and our company. We’ll optimize for the wrong things and fail to bring credit cards to the promised land.

Challenge #2 - Explaining who we are

Design is often broken up into “product design” and “brand design”. At Cardless we believe this dichotomy is flawed. The brand experience is an essential part of any consumer product, and it’s impossible to remove the “brand” from the “product”.

We are a business-to-business-to-consumer (B2B2C) business, which means we offer our products via our brand partners. That means our brand has to be able to sit alongside many different potential partner brands: a travel company like Uber or Airbnb, a consumer-facing digital brand like Glossier or Bonobos, or even a fitness company like Equinox or SoulCycle.

Cardless has to be able to exist alongside each of those brand partners and lift them up: bring them closer to the fans, users, and members that matter most. We also have to tell our own story: explain how we work alongside credit card networks (i.e. MasterCard), issuing banks (i.e. First Electronic Bank) , and technology platforms (i.e. CoreCard) to deliver a seamless experience.

We have to create a brand identity that puts us in context in our space. Thankfully, we worked closely for months with the extremely talented team at Pentagram to design our brand, but it’s time to test out their work. Take it out into the real world. Explain who we are and what we stand for.

Challenge #3 - Legacy mental models

Working in the credit card space, we often have to contend with legacy mental models that hold us back from building a better product. We have to educate our users on how to interact with our product so they can benefit from it.

Let me give an example.

With a traditional credit card product, you don’t get access to your account until a few days after your application is approved when a physical plastic card arrives at your door.

Over the life of your account, if that card number or physical card is ever lost, stolen, or otherwise compromised, your only recourse is to call a 1-800 number and request that a new card be sent to you. Your existing card number is deactivated and you lose access to your line of credit until a new physical card arrives in the mail.

This is deeply broken and frustrating, and we’ve built something better. Our users can instantly generate a mobile wallet card and view a virtual card number upon account approval, so they can access their account right away. A few days later, their physical card arrives in the mail.

That card is only designed to be used when a literal physical card is needed. It has no number printed on it and doesn’t expire for five years. Moreover, it’s easy to cycle your virtual credit card number or lock your numberless physical card, and with multiple ways to spend, you always have access to your account.

We flipped the script of credit cards in a way that delights our users. However, because of the legacy mental model of “cards”, it wasn’t enough to just build all of that. We also have and plan to invest more in explaining and educating our users on the rules and benefits of this new world that we created. After all, if they don’t understand this new model, they can’t leverage it.

What comes next?

As we scale from a handful of users to thousands and grow our team from 20 to 50, we know that design is going to be an essential component of what we do. Both to make sure that we build a consumer-friendly product and to ensure that we’re telling a compelling story about who we are and how we fit alongside our brand partners. Without design, we can’t build a human-centered, consumer-friendly product and we can’t effectively tell our story and explain who we are.

Sound interesting? www.cardless.com/careers

NOTE: Credit card and co-brand market sizes from Packaged Facts report.