FintechM&A / FundingPaymentsWealthtech

Early wage access brings financial inclusion to the underbanked, underserved

In the past few years, financial technology has managed to go from a background thought of the New York banker to a constantly seen and felt piece of the world’s infrastructure. The development of online banking, rise of ‘Super Apps’ and adoption of retail trading have all created incredible demand and expectations for these fintech products.

These are highlights of the recent fintech movement, but are just a few of the disruptive and innovative products being developed right now. While the financial crisis of 2008 brought more eyes than ever to the financial sector, the technology powering our money has never been as close to the everyday person as it is now.

Fintech is a broad term, and there is obviously a lot of different sectors doing different things within the umbrella. One thing I have noticed, however, is that a large number of fintech startups today are powered by a desire (and need) to provide financial services to those that are underbanked or underserved.

Financial inclusion is a bigger goal than ever, and there are innumerable companies trying to tackle the problem in just as many ways.

Adding flexibility to payday

B9 is one such company that is working to provide those financially underserved. While the company does provide a larger banking infrastructure and payroll platform targeted at underserved Americans, one of its most important anchor features is an early paycheck service.

The company gives users a B9 direct deposit account, where they can send full or partial direct deposits, and then utilizes artificial intelligence (AI) to parse employment information and predict expected future paychecks. Users are then granted early access to those funds, based on their employment history and expected future income.

Founded by CEO Sergei Terentyev in August 2020, the company is already on track to hit 200,000 customers by the end of the year and has hit 10x month-over-month increases in customer transactions. It has also raised $5.2 million in funding, including a $1.7 million pre-seed round in February and a $3.5 million seed round.

The early paycheck service is free of charge and can be used repeatedly per month, and the amount that can be withdrawn is based on previous payment history. The longer a user collects a steady paycheck, or the bigger they are, the more money that will be available for them to access early.

“We see also how people spend it. Where you transact, where you buy, the categories and codes of your transactions,” Terentyev said, explaining the data B9 uses to calculate available funding limits. “Basically we have a picture of your consumption and your earnings. That’s the way our algorithm can build and predict your economic behavior.”

Terentyev says the product is a significant way that B9 can help the large number of underbanked people in the US; the Federal Reserve estimated before the pandemic that 22% of adults (60 million) fell into that category. He says that most underwriters and lenders are overly focusing on FICO credit scores, which creates a real obstacle for underbanked individuals and opens them up to more predatory loans.

In addition to eliminating instant payment and withdrawal fees, B9 is also the only payroll solution on the market that is offering up to 100% of a user’s paycheck early, according to Terentyev.

“On top of that, what the other competitors don’t do, we provide the entire infrastructure for you; you don’t need any other bank. If we’re talking about new migrants to America or someone who doesn’t have their bank account yet, it’s super easy to open it with us,” Terentyev said, explaining additional ways B9 is separating itself in the market.

“You can have like everything in one place, and that also makes us different. We keep our customers closer. The customer service is also different when you compare with our competitors. People can call us, we have live agents on in-app chat, which is also instant. You can ask a question, and get the answer immediately, and that’s much more efficient than what we see with our competition.

Advancing its own paycheck

Moving forward Terentyev says the company wants to use its seed funding for marketing, with plans to hit 200,000 accounts by the new year, and hiring more engineers for technical improvements and product development.

He also says the company has started raising a Series A, is having discussions on who will lead that round and plans to complete it in the next four to five months. The company wants to use those resources to hit a million customers by the end of 2023 and bring pipeline products to launch.

“We have one product … that will probably be released in Q1 of next year, but we’re also adding lots of features in this year. That includes instant check cashing, because we saw a lot of our customers were being paid by checks, and they were telling us that so they wanted a solution.”

In other recent fintech news, Marqeta partnered with Mastercard and Paycast to launch a new card product that accelerates payments to marketplace sellers. The International Community Banker of America (ICBA) also launched a new venture fund with plans to accelerate BankTech adoption.

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