Dave, a new fintech app, is the David of the Goliath of big banks, battling sky-high overdraft fees by warning people they’re about to blow their budgets and even lending them $ 75 until their next paycheck.
With 4 in 5 Americans living from paycheck to paycheck, the mascot Dave’s cash advance, a bespectacled bear, can buy a tank of gas or groceries until the next payday. founder Jason Wilk told TriplePundit.
Options like payday loans can push people into more debt, as 3p reported.
Wilk said he wanted to take on the $ 34 billion overdraft industry because “it looked like the financial industry had the lowest brand loyalty of all” and was ripe for the disruption. Tackling overdraft fees was “something that could solve real customer problems,” he said. “We have all experienced it.
Banks charge an average of $ 35 each time a balance goes below $ 0 for a transaction.
Warns of an upcoming danger
For a $ 1 per month subscription, Dave syncs with clients’ checking accounts to monitor their spending habits and predict when they are at risk of overdrawing their accounts. Dave’s pop-up warnings anticipate regular expenses, like rent or utility bills, and alert users that problems are coming.
The $ 1 monthly subscription covers the costs of connecting customers to banks, getting balance updates, and sending text messages if a user is about to overdraft. Wilk said the company has no plans to share anyone’s financial history with third parties.
Dave’s goal is to help people of all income groups, Wilk told us. Of its 2 million users, about 15 percent are close to the food insecure level of income, he said. In the first quarter of 2019 alone, around 300,000 people used the app to purchase food.
To get an advance of up to $ 75 before the next payday, Dave requires users to have a job with guaranteed and stable wages and have the ability to repay the loan. The company does not pull credit reports to make this decision, so using the app does not impact a user’s credit score. Users are responsible for paying off Dave by the due date or may be banned from the app.
For the more than 25 percent of Americans who have taken an overdraft in the past 12 months, the service can be a lifeline, Wilk said. “Overdrafts are an expensive form of credit, and that didn’t seem like a good way to solve spending problems,” he told us.
Dave’s users pay an average of $ 500 a year in overdraft fees, Wilk explained, which is typical of most cash-strapped U.S. consumers, according to a report from personal finance website WalletHub.
Image: Jason Wilk, founder of fintech company Dave.
Dave’s demographics are younger: 80% are under 30, with an average age of 22. “They’ve just graduated from college and are learning how to manage their money for the first time,” Wilk told us. With budgeting tools and the need to repay cash advances, Dave’s Bear is aimed at helping users learn better money management skills.
Even billionaire investor Mark Cuban, one of the early backers of the Dave app, says he “was crushed by overdraft fees in my 20s.”
Yet, with 40% of Americans unable to cover an emergency expense of $ 400, it’s not just young people who find themselves strapped for cash.
Recognizing that chronic overdrafts can be part of bigger financial pressures, Dave’s app offers Side Hustle, which connects Dave’s users with side gigs to earn extra income. To participate, Dave users select the concerts they are interested in and receive the information they need to get started. To date, Dave has received over 100,000 applications under the program.
Tip us and we’ll plant a tree
Dave doesn’t make any money from the loan service other than optional donations. These donations – or tips, as Wilk describes them – make it possible “to help people without charging interest rates,” he said.
For every percentage of a tip, Dave also donates a tree in sub-Saharan Africa through his partner, Trees for The Future. “I really wanted to have a charitable part of the business, which is usually not what you see in the market. We thought planting trees might well fit our tipping model, ”Wilk told 3p.
Images courtesy of Dave