Neu helps students build credit and avoid the debt trap

Neu’s path to success will produce financially literate college graduates and a strong bottom line. The journey began in late 2023 with the release of the Neu Card, whose attributes include no late fees and interest charges, a maximum $1,000 spending limit, no Social Security number required, and no credit history or cosigner required. It also provides 1.25% cash back and a maximum $7 monthly subscription fee.

Co-founder and CEO Abhishek Agarwal said Neu’s origins lie in his experience as an international student studying in America three decades ago. Despite being a successful student with a double major in engineering and economics at a good school, it took him nine years to get his first credit card. Agarwal needed a cosigner to rent his first apartment after graduation.

Neu’s design was also shaped by the experiences of co-founders Susan Eliza, Nawal Chadha, and Hemant Wadhwa. Another contributor is Agarwal’s experience as a director at mPokket, an Indian micro-credit marketplace.

Why students fear credit

They also did their research. Neu retained market researcher 3Gem to survey 1,000 college-age students and their parents. Nearly half of students aged 18-24 did not have a credit card; 47% cited debt fears or potential credit score damage as reasons.

That attitude brings problems down the road. Like Agarwal, who tried but couldn’t get a card, those who opt not to get one fail to build the credit history foundation that is necessary to obtain shelter and financing. 

Many others plan. Nearly 60% said they applied for their first credit card precisely because they wanted to build their credit score and establish a credit history. Two-thirds of parents who discussed credit with their kids did so because they wanted them to build for the future.

How Neu builds stickiness

A student-targeted card must be carefully designed to maximize the benefits and limit the risk. One such pitfall Agarwal wanted to avoid was seeing cardholders amass debt through compounded interest.

“The segment we’re going after, we didn’t want them to have this massive amount of debt, and in college life, it happens quite a bit,” Agarwal said. “I was completely broke as a student.”

Agarwal said Neu is built to scale. With no interest and late fees, along with 1.25% cash back, things should work fine if they attract enough membership fees.

So far, so good. Neu Friends is a campus ambassador program that generates product feedback and is a planning sounding board. Agarwal said responses suggested students would embrace the subscription model. It also formed the company’s digital-first focus. Neu’s mobile-first application process allows KYC, selfie submission and all checks online, an occurrence rarer than some would think.

That laser focus on the customer experience extends to color schemes and a social media financial wellness program that educates students on topics like the importance of building their credit scores.

“What topics do students want to learn about in credit or financial wellness?” Agarwal asked. “What are their fears, and how to address them? It’s a good conduit for executives to understand the user.”

Providing such added value fosters stickiness. Agarwal said it’s a win-win situation, as customers stick around and become financially healthier as they learn.

Transparency’s more than a buzzword

Agarwal said transparency is another crucial aspect. While a contender for 2023’s most over-used fintech word, Neu actually reflects it. If a cardholder doesn’t pay a $500 balance for two years, the most they’ll pay is $168. The experience is designed to eliminate customers’ fear over the opacity of many financial products.

“All these terms like interest and APR and late and hidden fees, they don’t know what they’re signing up for,” Agarwal said. “So we wanted something very transparent.

“What Netflix did with Blockbuster, we’re trying to do with a traditional approach, especially for this market. You get it, and you don’t have to worry. If you forget to pay, we’ll remind you.”

Neu’s growth plans

Like many fintechs targeting younger segments, Neu has plans to grow with their customers. Agarwal said there could be more credit and literacy products, scholarships and career counselling, perhaps charge cards for young professionals. More cashback and sponsored restaurant and retail discounts can offset the monthly fee.

That and more are on the drawing board, but they can wait. Neu’s focus is on getting the core aspects right. Only then can it properly evolve with the customer. Moving too fast can produce mistakes.

“That’s the main driver – to allow more people to come into the credit score stream,” Agarwal explained. “Out of 20 million students in the U.S. in two- and four-year colleges, about half of them have a card, and the other half don’t.”

Those interested can download the Neu app from the Apple Store or Google Play.

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• Source: https://www.fintechnexus.com/neus-helping-students-build-credit-avoid-debt-trap/