Paying With a Smile

If you own a credit card, you’ve most likely at some point or another gotten that dreaded call and heard that gutsinking sentence: “There has been suspicious activity on your account.” What follows is typically hours of heckling the credit card company, jumping through hoops, belaboring the fact that no, you did not buy 37 kayaks at a sporting goods store in Arkansas. And no, you did not purchase a full-body shiatsu massager either. And why on earth would you have needed a gold-plated air fryer?

While credit card security has certainly become much more sophisticated over the years, credit card fraud has evolved even more quickly. It’s no longer just emails from Nigerian princes you have to watch out for—it’s the lessdetectable threats that come in the form of malicious software programs, phishing scams, and even largescale data breaches of companies that hold your private financial information.

A 2018 study on credit and debit card fraud estimated that, on average, 1% of every card transaction is lost due to fraud or fraud-related costs. To put this in perspective, out of the $7 trillion in consumer expenses charged to cards in 2018, $70 billion was lost to fraud. The cost of this financial hemorrhaging eventually makes its way back to the consumer in the form of higher APRs and fees.

Reza Solomon is the guy asking the right question: Can’t we make a better, more secure credit card?

Solomon, who holds a master’s degree in Controls and System Dynamics from Villanova and a PhD in Mathematics and Economics from Virginia Tech, worked with the Office of Naval Research designing autopilots for unmanned aerial vehicles before holding positions at major financial firms such as Goldman Sachs, Protiviti, and JPMorgan Chase. His time in the financial sector is what inspired him to create his product which would serve as the namesake of his company—PlutoCard.

“I started working at different banks and learned about the different deficiencies that consumer credit is facing,” says Solomon. “The result of that was basically me trying to find a solution that fixes these problems, and

PlutoCard was born that way a couple of years ago.”

PlutoCard is a credit card…but it’s not just any credit card. Although it may look similar to what you have in your wallet, it’s unique in that it introduces two innovations in the world of credit card transactions.

The first is the facial recognition technology it uses to authorize transactions, eliminating the need for signatures, security codes, or PINs. Instead of having a permanent number or security code, PlutoCard credit cards function by way of a smartphone application. The app contains a dynamic credit card number, which changes at regular intervals and syncs with the card’s smart chip, making it virtually impossible for snooping thieves to go on a shopping spree at your expense.

When a customer uses PlutoCard to make a purchase, a notification is sent to their phone asking them to confirm the details of the transaction. If confirmed, the app’s artificial intelligence engine will take approximately 3,000 measurements of the person’s face to verify their identity and authorize the purchase. Interestingly enough, more than 2,000 of these measurements are made of the upper hemisphere of the face since eyes are humans’ most discernible facial feature (apart from also being the windows to the soul, apparently). This allows the facial recognition technology to remain accurate even when the user is wearing a mask.

The entire process takes mere seconds and creates a secure, closed-loop authorization system that makes the cardholder an integral part of the transaction, while proactively preventing fraud at the point of purchase. Moreover, the process is designed to be extremely user-friendly and to operate with existing payment platforms and technology. Besides cutting down on hassle for the consumer, PlutoCard also saves the 1% per transaction currently being lost to fraud, which functions as extra revenue that can fund elevated rewards for the credit card holder.

PlutoCard could easily have stopped there and been a great product. But during his tenure in the banking industry, Solomon had witnessed first-hand the large disparity in credit inclusiveness for certain underserved demographics. He realized that there was a need to make credit-based financial products available to those who were qualified, but whom traditional credit bureaus were effectively shutting out.

For most people, eligibility for things like credit cards, personal loans, and mortgages are based on FICO credit scores. However, this can be a narrow scale by which to measure creditworthiness for many people. One out of every ten Americans is currently considered “credit invisible,” meaning that credit bureaus don’t have enough information with which to generate credit scores for them. There are another 70 million people in the U.S. who are “credit underserved” because the limitations of the FICO scoring system make it difficult for them to obtain credit-based products at a reasonable rate. In an analysis performed in partnership with an aggregator of personal loan applications, PlutoCard also found that 70% of the analyzed credit applications were either declined or priced at a rate higher than the consumer could pay.

This is largely due to the fact that FICO scores look at only a few financial indicators when calculating a credit score. With PlutoCard, Solomon’s goal was to develop a way to look at consumer financial data through a more meaningful, contextualized lens. As a result, PlutoCard’s unique underwriting engine utilizes AI-generated behavioral models to determine creditworthiness. This system uses a more comprehensive set of data and delves deeper into patterns of financial behavior to look beyond just the numbers and to assess how consumers are actually managing their money. For example, unlike a traditional FICO score, the PlutoCard method takes into account a consumer’s income, the rate at which their income is expensed, and the financial demands of certain life events such as getting married, having kids, or taking a trip.

“We underwrite based on alternative factors and data. We don’t pull FICO scores,” explains Solomon. “Based on that, our AI-based engine looks at the behavioral aspects of somebody’s financial life over the last two years instead of just looking at the current snapshot of a FICO credit score. We have a much more accurate and much more inclusive credit rating mechanism that caters to everyone, not just the people who have a good credit history for the last 20 to 30 years.”

The purpose of this much more nuanced approach to underwriting is not to extend credit to just anyone, but to those who are truly creditworthy and currently underserved due to the limitations of the traditional credit scoring system. And while PlutoCard only plans to issue credit cards for now, the company hopes to use its novel credit scoring method to eventually offer a range of financial products and services, such as personal loans, debit cards, mortgages, checking accounts, and deposits.

PlutoCard’s innovativeness has not gone unnoticed. The company was recently recognized by Analytics Insight Magazine as one of “The 10 Most Disruptive Face & Image Recognition Solution Providers In 2021” for its creative use of facial recognition technology to help prevent fraud and funnel rewards back to users. But beyond this, PlutoCard is also innovative in its mission to provide inclusive access to quality financial products that can improve consumers’ lives. Perhaps not the simplest of tasks, but one that PlutoCard is well on its way to achieving. “The more technology advances, the more we have to evolve,” says Solomon. “What we’re really trying to do at PlutoCard is be ahead of the curve.” ♦

You can learn more about PlutoCard and how it works at myplutocard.com.