May 17, 2024
Why QED invested in Kudos
If there’s one thing that the literature on financial health teaches us, it’s that financial literacy education mostly doesn’t work.
If there’s a second thing that the literature on financial health teaches us, it’s that people need advice that is personalized to their exact situation, delivered exactly when they need to make a financial decision, and easy to follow.
Most people neither need nor want to learn about compound interest, but everyone wants help with the question: “which is the best card for me?”
Fifteen years ago, in February of 2009, I sat in a room in the Old Executive Office building next to the White House and asked whether the government could force the kinds of disclosures that would make this question easy to answer. In fact, we went a step further: could the government run a website that allowed consumers to upload their actual financial statements and have the website tell them which credit card would actually be best for them on an all-in basis. I might love the idea of a premium rewards card, but that’s not relevant if my credit score doesn’t let me qualify.
At almost the exact same time, across the Potomac River, my partner Frank Rotman was preparing to lead an investment in Credit Karma. More than any other investment, Credit Karma made our firm. But even more importantly, Credit Karma is the closest thing that the market has created to realize the vision we discussed about giving consumers true informed choices when shopping for credit.
In 2009 we were still four years before the disastrous launch of healthcare.gov, and I didn’t know that Credit Karma existed. But as we worked to refine the CARD Act of 2009, I believed that this website idea was worthy but doomed, so we left it on the cutting room floor.
Today, with the CFPB working to finalize rules that guarantee consumer access to their financial data (while Plaid, MX, and others have already taught us to expect it), Credit Karma and Nerd Wallet juggernauts of financial advice, we’re now finally in a place to realize the promise of that 2009 idea – to truly meet the tests of the financial health literature.
QED is proud to announce that it has led the Series A in Kudos – a card and spending rewards company that provides constant, always- on advice to its users. Not just the best card for a consumer, but through the lifecycle – what card to use with which merchants, how to take advantage of time-limited offers, and doubling rewards when you shop at merchants that are partnering with Kudos “Boost.”
Starting with card selection, Kudos launched a ‘dream wallet’ feature that was the first card calculator to make recommendations based on what cards a consumer already has. For example, when I used the tool to explore whether I should switch from Amex Platinum to Chase Sapphire. The explorer was able to show me that I was very likely to make significantly more in rewards value than the annual fee on the Chase Sapphire, but also that if I did so, I should cancel my Amex Platinum. It showed that if I shifted spend to Chase, the Amex membership fee would become inefficient. Today, the Kudos team is also announcing the next generation of Dream Wallet that combines this wallet-aware recommendation so that it is also credit aware and transaction aware – understanding what cards a consumer is likely to qualify for, and combine that with a consumer’s banking behavior.
The original Kudos product coaches you to always use the right card on every purchase. In e-commerce, Kudos is a browser extension that tells you what is the best card to use and also acts to auto-fill your credit card data. While the offline use cases aren’t core yet, the app has a “cheat sheet” that reminds me that JetBlue (!) is actually the best card for grocery shopping and my Marriott Visa is still the best card for airlines and car rental.
When I shop online, the trustee Kudos pup loyally looks out for me (a shopper’s best friend) and highlights when I have an opportunity to double my rewards with Kudos Boost. Kudos collaborates with another QED portfolio company, Wildfire, to access merchant discounts and pass them back to consumers.
Kudos markets to consumers with a simple promise – the opportunity to double rewards when you pay with the right card at the right merchant. But more importantly, it opens the door to removing the need for financial advice at all – the opportunity to simply put my checkout journey on autopilot.
Many years ago (before The Points Guy was founded), I was a consultant and didn’t have children. While I was not the best at optimizing rewards (one of my colleagues was so good at the game that he didn’t even have an apartment), I still love the idea of optimization. Now I don’t have time to build spreadsheets (or even ask ChatGPT to build spreadsheets), but I take comfort in knowing that the Brian “The Points Guy” Kelly and I are both investors in Kudos.
Though the CARD Act was about to revolutionize credit card disclosures, the technology to ingest and categorize that information was still in its infancy. Moreover, neither the law to enable nor the technology for consumers to access a digital form of their transaction history existed. I also had a premonition that launching a consumer facing website for credit card shopping might be a bit hard for the Federal Government to pull off.
The idea didn’t die, however. The same team used this idea as an inspiration for Section 1033 of the Dodd-Frank Act that gives consumers the right to access their financial data in a digital format. The provision is finally on the cusp of implementation and meanwhile Plaid, MX, Yodlee and others have raced to give consumers this access in practice even without a regulatory requirement.