This FinTech Start-Up Wants To Cover Your Overdraft Fees And Just Announced $ 35 Million Series A Funding
Almost two decades before Zuben Mathews co-founded a consumer fintech app, he was studying economics at the University of Chicago as a recent immigrant to the United States. Despite a scholarship and regular stipends from his mother in India, Mathews found himself without a credit score. , living from paycheck to paycheck. He says he spent $ 1,000 on overdraft fees just that first year.
“I just couldn’t figure out what was going on,” he says. “The number of times I’ve gone down to the vending machine and bought Snickers for dinner is something I’ll never forget.”
This experience helped inform Mathews’ creation of Brigit in 2017, a startup he runs as CEO alongside co-founder and CTO Hamel Kothari, a 26-year-old Berkley graduate recently featured on The 30 Under 30s of Forbes 2021: high-income startups listing.
New York-based Brigit, a nearly 40-person operation, raised a $ 35 million Series A round in early 2020, previously unannounced so far. Lightspeed Venture Partners led the round, with participation from lead investor DCM, as well as Nyca, Canaan, DN Capital, CRV, Core, Shasta, Hummingbird, Abstract, Brooklyn Bridge Ventures, Secocha, Ashton Kutcher’s Sound Ventures and Flourish Ventures . NBA star Kevin Durant, who invests through his company Thirty-Five Ventures, has also backed Brigit on the tour – and Durant is expected to take a more active role in promoting the startup once basketball season is over. -ball finished.
One of Brigit’s key offerings is the anticipation and coverage of overdraft fees, which typically run around $ 35 per instance for traditional banks. Once a user adds their bank credentials to the app, Brigit’s algorithm digests up to two years of personal financial data to create a holistic overview of that individual. Brigit can underwrite these people and, using cash flow history, predict if they are going to run out of money in their bank account. If needed, Brigit can automatically transfer up to $ 250 to a user’s account before an overdraft fee occurs, saving them an average of $ 514 in overdraft fees per year. The startup also provides emergency loans on demand that can be issued in less than 90 seconds.
Typically, individuals must earn around $ 1,500 per month to be eligible for the full $ 250 cash advance, which is interest-free, which sets Brigit apart from the notorious “payday loan” services. The app’s algorithm monitors spending patterns to determine if the business can lend a user long-term or change the amount they can borrow if needed.
Overdraft fees are big business: In 2019, banks made more than $ 11 billion from fees, according to the Center for Responsible Lending. The organization also found that only 9% of account holders pay 84% of fees each year, and this group tends to have balances below $ 350.
Brigit is not alone in trying to help consumers meet this challenge. Fintech startup Chime operates a “SpotMe” program, allowing members to withdraw up to $ 100 on their debit cards without incurring any fees (although you can tip), while the Dave app can cover the costs. overdraft up to $ 75 for qualified users with a Monthly Subscription of $ 1 (tip optional). Unlike these competitors, however, Brigit’s goal is more focused and she does not aspire to become a digital bank. It’s intentional, according to the CEO, to help users gain their financial footing without overloading them with features or accounts.
“I can’t understand budgeting if I’m under financial stress, and one of the biggest causes of financial stress would clearly be not having money when I deserve it,” says Mathews.
Beyond overdraft coverage and emergency loans, the app offers budgeting tools, identity theft insurance, information on how to register for side activities and more. financial well-being advice. For example, Brigit can send cash-strapped users a script to help them negotiate with representatives for cell phone plans for lower rates, as well as the phone number they should call. For T-Mobile customers, Brigit found that her prompt saved them an average of $ 19.85 per month after a 21-minute call.
Brigit’s full set of products, including loan options, cost $ 10 per month and the company’s revenue is currently 100% based on this subscription model. Brigit serves over 1.5 million active users today, of which around 250,000 were paid subscribers at the end of September. The expected revenue for 2020 was $ 30 million at this point.
The engagement and retention numbers, especially in the context of a financial app, caught Lightspeed’s attention early on, according to Jeremy Liew, a partner at the company who has joined the board of directors of. Brigit. (Liew also made early bets on Snapchat, Giphy and Affirm – a late payout startup that doubled its valuation to $ 24 billion in an IPO on January 13).
“One of the ways we measure this was looking at the ratio of Daily Active Users (DAU) to Monthly Active Users (MAU), and it was actually very high in the context of an app. financial, where often people can watch an app once a month, “Liew says.” We were seeing DAU / MAU ratios of 20% to 25%, which is comparable to social media apps … which suggested Brigit was building an new habit with its users. ”