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welcome to Exchange! If you received this in your inbox, thank you for your subscription and vote of confidence. If you are reading this as a post on our site, please register over here So you can receive it directly in the future. Every week, I look at the hottest fintech news from the previous week. This includes everything from funding rounds to trends to niche analysis to hot takes on a specific company or event. There’s a lot of fintech news out there and it’s my job to stay on top of it – and understand it – so you can stay informed. – Mary Ann
Q&A with Dev Founder Jason Wilk
Before the collapse of Silicon Valley Bank, I had a conversation with Jason Wilk, founder and CEO of NeoBank. Dev, about the company’s work. I was intrigued by the bank — which counts Mark Cuban as one of its investors as a private company — because it was considered by some to be a backward path to banking. Instead of starting to offer checking and savings, he worked there. And the strategy seems to have paid off for the fintech company, which went public in January 2022. It recently reported 45% higher GAAP revenue of $59.6 million for the fourth quarter of 2022, up 45% from the same period last year. Here are excerpts from my interview with Wilke, edited for brevity and clarity.
TC: Are you benefiting from higher interest rates, and if so, how?
JW: This is a challenging area for growth companies, because the cost of capital is very expensive because of interest rates, so they may have to raise a lot of capital in the long run.
That’s one of the reasons our stock is down so much – because we’re not yet profitable, although it’s close to it. The advantage of higher interest rates for customers is that they can earn higher interest on savings and deposits, and we also benefit from higher interest rates. But overall I would say a higher interest rate environment is more of a negative than a positive for the business.
You mentioned the path to profitability. When will you see it?
Last year we were from 8 to 10 quarters. We are now 4 to 6 quarters away from when we expect the company to be profitable. We were in 2018 and 2019 before, so we were early. We have added enough manpower to build our future roadmap and have 1.9 million monthly marketing members to dev. To achieve profitability, we need to reach 2.2 to 2.4 million customers. We do not need to raise capital or any other amount of money.
Our anchor feature that broke payday loans is our Extra Cash, which allows people to borrow small amounts and now pay up to a $500 cash advance (that limit increased from $250 to $500 last summer) in up to 14 days with no late fees and no Return with interest. In the year During the pandemic in 2020, the government was giving out a lot of free money in amazing dollars and therefore there was less demand and our marketing message was less resonant during that time.[thatlimitwasincreasedfrom0to0lastsummer)withupto14daystopayitbackwithnolatefeesandnointerestThenin2020duringthepandemicthegovernmentwasgivingawayalotoffreemoneyviastimulusdollarsandsotherewaslessofaneedforitandourmarketingmessagewaslessresonantduringthattime[thatlimitwasincreasedfrom0to0lastsummer)withupto14daystopayitbackwithnolatefeesandnointerestThenin2020duringthepandemicthegovernmentwasgivingawayalotoffreemoneyviastimulusdollarsandsotherewaslessofaneedforitandourmarketingmessagewaslessresonantduringthattime
That’s why we’ve grown the business to 26% in 2021, and we’ve ramped things up as things get closer to normal.
They started banking not long ago. How is it going?
Dave also focused on the cash product, but the most requested feature was that people wanted to bank with Dave. In the year We opened our own checking account at the end of 2021 and it was going well from the second and third quarter of 2022. We decided to become a full bank and give every customer a checking account and now every new and existing member is a bank member And because of that massive expansion and now that every customer has a card, we’ve been able to grow the banking business by 90% a year.
So you didn’t start out as a complete neobank – you turned into one. That should help reduce your CAC (Customer Acquisition Costs).
Yes, that’s right. That was always the plan if you go back to our seed shelf. We found that CAC is very high for acquiring bank customers.
And now it’s a major strategic focus of the company. We think it gives us more time to stay with our customers and be their primary banking destination. Our algorithm says, “Hey, you can still get extra cash and send the money to your Chase account, but now we have this Dave Debit card, which will get the money faster and you can also deposit your paycheck here and you can get things like low balance fees and customer support fees and other banks.” Stop paying for all the things you try to charge for this point.
We’ve seen our acquisition costs actually decrease – 31 percent year-over-year in 2022 over 2021. In the fourth quarter alone, we gained about 550,000 new members.
How else are you going to keep yourself relevant to your customers so that you don’t end up with them?
One way is to let the customer decide on a return date that is fair to them and fits in with their next payday. It’s a guaranteed amount that you can tap on a check to pay, and it doesn’t require any mandatory fees. So instead of paying the bank $38, you can tip Dave anywhere from zero to 10% of the amount we give you. On average, our tip is around $4. And it’s less risky for Dave, because we’re advancing money, not lending.
I started Dave because I was frustrated with all the overdraft fees charged by the big banks. I felt it was unfair to charge loyal customers such a huge fee on a negative balance, knowing that they would get a full refund in a few days.
How can AI play into all of this?
We’ve gotten really good at our AI engine, which knows exactly what someone’s income is and how risky it can be to give someone the money before they’re paid. And because of that AI engine, we got default rates down to about 2%. And we’ve been able to increase the amount of money we give, so the money has gotten a lot better over the years.
We also use AI in customer support, over 50% of our support responses are with chatbots. This also reduces costs. We have 320 employees and most banks have over 100,000 employees. A high head count often means a high price for consumers.
Now, Dave isn’t the only digital bank reporting impressive numbers. Grasshopper bankBusinesses digital bank, reported earlier this month that the assets reached more than 620 million dollars, an increase of 108% year-on-year and the total income in 2022 is more than $ 17 million, which represents a growth of 39% year-on-year.
Weekly news
As Romain Dilette reports: “The start of fintech Checkout.com It is known for its payment processing service, but the company is launching a new product…: its customers can now create payment cards for their customers. The company has been experimenting with rolling out Checkout.com for some time, and millions of cards have already been created with the new service. Checkout.com supports physical cards as well as virtual cards that can be used multiple times or disabled after the first payment. More here.
As Sarah Perez reports: “Amazon It may be closing several high-tech physical retail stores in recent days, but some of the technology it developed for those stores is finding a new home. The online retailer said. Panera It will be the first restaurant to deploy Amazon’s palm-reading payment and loyalty system, now known as Amazon One, in its own stores, allowing customers to pay and access the chain’s loyalty program. More here.
Also from Sarah: “Restaurant Delivery Service DoorDash It announced that it will start supporting customers to pay in cash for online orders. But there’s a catch — the only feature being rolled out is DoorDash’s white-label delivery solution for restaurants, DoorDash Drive, which lets restaurant owners tap DoorDash’s delivery network from their own website or app. The company said Chinese restaurants and pizza shops were early adopters of the feature during testing. More here.
Christine Hall reports: “Payment and purchase service Klarna It is the latest company to announce its integration with ChatGPT. The company says it is “working with OpenAI to develop an integrated Plugin for ChatGPT to use the protocol” and a personalized shopping experience that provides Klarna users with shopping advice, inspiration and product recommendations when they request a product. Connects through the Klarna search and comparison tool. More here.
from me The roof of the roof The asset technology startup laid off 27 percent of its workforce on March 22, five months after laying off 20 percent of its workforce. An online marketplace for investing in single-family rental homes raised $240 million at a $1.9 billion valuation a year ago. According to the email, co-founder and CEO Gary Beasley said the RIF is a “response to the difficult macro environment” and the “negative impact” it is having on Roofstock’s business. More here.
The company’s website states that it has 400+ employees or “ceilings”, but it is not known if this figure is current.
Hindenburg Research Bloomberg released a report on payments company Block (formally known as Square) after a two-year investigation that it “facilitated fraudsters.” Among the charges, Bloomberg reported, the report said, “Block’s most popular money app was facilitating fraudsters who took advantage of government stimulus programs during the pandemic.” Block said that the release of the report’s findings would prompt legal action against the Hindenburg. The lawsuit sent the company’s stock price plummeting 15 percent on March 23, the day the report was released.
F-Prime Capital Earlier this year it published a State of Fintech report (which we covered in depth). But one area where we haven’t lasted is LatAm’s fintech discoveries. F-Prime points out that there are five Latin American companies in the F-Prime Fintech Index: Nubank, Pagseguro, Mercado Libre, Stone and Dilocal. Nubank and Dilocal were among the 10 biggest exits in 2020 and 2021, and both saw significant declines in their stocks. But F-Prime said in an email that “balanced LatAm fintech companies are still growing at a high rate,” with Nubank LTM (last 12 months) revenue up 117% and Mercado Libre up 54%. In addition, surprisingly, it found that four out of five Latin American companies in the fintech index have a payment business model.
Insider has published two articles about HR/fintech startups Share Last week we looked at company culture, the practice of hiring multiple independent contractors (the company’s CEO is one!) and the question of whether employees are classified as independent contractors. You can read those articles here and here.
Other news:
MoneyLion has announced the evolution of its embedded financial technology, rebranding “Even Financial” to “Engine by MoneyLion”.
Following the closing of Silicon Valley Bank, Crescent announced up to $75 million in FDIC protection and 3.75% APY for US businesses.
Sophie Check & Save to provide access to up to $2 million in FDIC insurance
How Wealthfront offers $3M in FDIC insurance
Mercury moves to close the gap created by the SVB collapse
Capitalize financial incentives for Robinhood retirement account holders
Sumer predicts a “clean-up” of the fintech sector after the collapse of SVB
CompScience inks MGA agreement with Swiss Re, National
Zumper doubles down on short-term rentals: a unique vacation site, launches a new subscription service for flexible stays, and hits inventory milestone.
Image Credits: Bryce Durbin / TechCrunch
Funding and M&A
Featured on TechCrunch.
ICYMI – great story $500 million deal in 12 hours: How Rippling struck a deal as SVB melts down
Southeast Asian credit fintech Kredivo scores $270M Series D
Former strip engineer raises $4M for Beam, a fintech startup to help contractors get paid faster.
Etoro raised $250M at a $3.5B valuation after liquidating a SPAC, which is seeing slow growth.
And elsewhere
LatAm subscription payment startup Toku has raised $7 million in seed funding
Fintech startup Rain raises $116M to accelerate payroll cycle for hourly workers
Well, that’s it for this week. Thank you so much for reading and sharing. Your support means the world! xoxo, Mary Ann
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