Pesto has raised $11 million and launched an asset-backed credit card.
The Pesto Mastercard, which is the company’s first product, is available to customers who send valuables to be used as collateral and is designed to provide an alternative to pawn and payday loans, Pesto said in a Thursday (May 25) press release.
“Pesto is on a mission to help all Americans find an alternative to high interest rate loans by providing a straightforward way to secure liquidity and build credit through their assets without having to sell them,” Pesto founder and CEO James Savoldelli said in the release.
To get a Pesto Mastercard, consumers provide details about their valuable items to Pesto’s online credit estimator tool, receive an estimate, complete an online application, mail their items to Pesto and then receive a final offer of credit, according to a video posted by the company.
The customers receive a credit card issued by Continental Bank based on the value of those assets, with rates that are similar to existing credit cards and as much as 90% less than equivalent pawn loans, according to the press release.
Over time, customers can establish or rebuild their credit score and qualify for an unsecured credit card, the release said.
Pesto raised its funding from a dozen investors, including Activant Capital, and will use the money to expand its customer base across the United States, starting in Atlanta and Los Angeles, per the release.
“Millions of Americans are defaulting to predatory loans as inflation raises household expenses and banks tighten lending to low FICO customers,” Activant Capital Partner David Yang said in the release. “We’re excited to back the Pesto team on their mission to fix America’s debt trap pandemic and offer a path to a more secure, credit-backed financial future.”
PYMNTS research found that 80% of consumers who have noticed price increases said their wages have not increased to at least match inflation.
This finding comes at a time when 61% of consumers live paycheck to paycheck, according to “New Reality Check: The Paycheck-to-Paycheck Report: The Regional Divide Edition,” a PYMNTS and LendingClub collaboration.
The report found that the share is higher in urban areas, as nearly 70% of urban dwellers lived paycheck to paycheck in April.