Firstcard startup to launch student-focused bank card

Aug. 18, 2021, 10:46 a.m.

Firstcard, a startup that aims to provide student-accessible banking solutions, is launching its first product — a debit card with no fees and cashback at local retailers — out of Stanford and UC Berkeley next month.

Founded by Stanford visiting scholar Kenji Niwa, the startup hopes to help college students control and minimize their student debt while teaching them smart financial habits for the future. In order to do so, Firstcard has created products that are uniquely catered to the student population. Unlike conventional bank loan products, Firstcard’s products will not require customers to have a salary or credit history.

“Existing banks ignore students because students have no salary, no credit, no money, but we are focused on students,” said Niwa, who is also an MBA student at UC Berkeley.

The startup’s first product is a debit card that has no fees, requires no minimum balance or credit history and provides up to 15% cashback at hyperlocal retailers. The card will initially be offered at Stanford and UC Berkeley. According to Niwa, Firstcard is partnering with retailers at the universities’ campuses and nearby vendors.

“Our vision is to have a world where students don’t have to worry about their finances while they’re pursuing their higher education,” said marketing intern Angelique Zoile, a UC Berkeley rising sophomore, who joined the startup to promote financial literacy among college students.

Paul Jockisch, the chief financial officer of Stanford Federal Credit Union (SFCU), sees Firstcard’s product as part of a customer-focused trend in fintech — financial technologies and innovations that compete with traditional financial services. Jockisch said financial institutions are looking for a card that makes the most sense for its customers, which includes cashback and no fees, especially for the student demographic.

“At the end of the day, people are looking to find a product that suits their behavior. And so, a way of incentivizing that behavior is, of course, cashback,” Jockisch said. 

But, according to Jockisch, Firstcard’s lack of fees for its users makes the company’s ability to earn profits an interesting challenge.

According to Zoile, Firstcard’s business model “revolves around getting compensated by vendors, through transaction and advertising fees.” The latter would come from advertising retailers in the Firstcard app, she added.

“We can also make money through interchange fees as a card issuer,” Zoile said, with future plans including building loan and credit card products for revenue from interest.

Firstcard has over 100 partnerships with local retailers for cashback, including for food, entertainment and shopping, according to its website. The debit card also comes with the Firstcard app, where customers can see a map of where the closest discounts are. The app also allows customers to track how much they have saved over one week, month or year.

In addition to working with retailers, Firstcard partners with banks to offer banking accounts.  The customer-facing portion of the product, however, is still managed by Firstcard, Niwa said.

While Firstcard’s retail partnerships are part of a banking industry trend to provide customers with a wide range of benefits, the startup’s hyperlocal focus could be a challenge for retaining customers who leave the geographic area, Jockisch said.

Keeping such customers, such as students who graduate and move away, is one of Firstcard’s key goals, according to Zoile.

“We plan to [geographically] extend Firstcard to the rest of the nation. The idea is to have these postgrads still be able to enjoy cashback rewards, even after they graduate,” Zoile said, adding that the startup has plans to expand into Los Angeles and Boston.

Firstcard’s future product development plans encompass not only addressing the inclusion of students after graduation, but also that of international students.

Unlike SFCU’s student debit card, Firstcard currently requires that applicants have a social security number, which can present challenges for international students hoping to use the product. However, the startup is working to remove this requirement, according to Niwa, who had first-hand experience of this difficulty as a first-time U.S. student several years ago.

The Firstcard team is also building its own credit scoring algorithm to assess students that apply for their products, Niwa said. 

The startup plans to provide a financial education program to students that, once completed, will increase their credit score and allow them to access low-interest loans. To a traditional bank, all students are the same, but Firstcard’s program and credit scoring will allow them to distinguish students’ creditworthiness, Niwa said.

With three million dollars raised to date from U.S. and Japanese venture capitalists, Firstcard plans to hire more engineers, as well as business development and regulatory professionals and interns, to develop other student-oriented products, including lending products, according to Niwa.

“By helping students save, we hope that they’re free to pursue their hopes and dreams without that financial burden looming over them,” Zoile said.

Jonathan Ling is a graduate student in Management Science and Engineering at Stanford. Contact him at grind ‘at’ stanforddaily.com.

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