Fintech inspired by Black Lives Matter targets underbanked

Paybby, a new challenger bank whose founder was inspired by the Black Lives Matter protests last summer, is teaming with banks and others to make loans to minority-owned businesses and develop consumer and commercial financial products that meet the distinct needs of underserved communities.

To get Paybby (which stands for “pay Black brown and you” and pronounced “pay baby”) off the ground quickly, CEO Hassan Miah bought an existing challenger bank called Wicket in January.

He also has partnered with Carver Bancorp, a community development financial institution in New York, and Boss Insights, a company that aggregates business data, to participate in the Paycheck Protection Program.

Hassan Miah, founder and CEO of Paybby, is planning special features in his company’s app designed for customers who rely on the Supplemental Nutrition Assistance Program.

Paybby, based in Syosset, N.Y., is one of several digital banks targeting underserved communities. Even though an “enormous oppportunity” exists in tailoring products for particular groups, the company’s biggest challenge will be trying to stand out in the crowd, according to Mary Dent, a financial services consultant and the former CEO of Green Dot Bank.

“It’s a fine aspiration to want to build a neobank and serve different populations,” Dent said. “The question is, can people take it to the next level? What will distinguish the neobanks that make it from the neobanks that don’t over the next two to five years? Do they understand some unmet need, or are they just some new version of the same thing?”

Paybby’s initial products are basic, but Miah says it’s planning to add features that will appeal especially to people of color such as letting people integrate federal food coupons into their app and debit card and qualifying people with thin credit files for bank accounts.

And its business-development methods seem innovative. The company is sourcing minority small-business owners through social media and community organizations for the latest round of PPP, which emphasized access for minority, underserved, veteran, and women-owned businesses at launch.

Miah, who was previously a managing director at Intel Capital, was motivated to create a challenger bank for people of color after George Floyd’s death at the hands of police in Minneapolis this past summer, and he spent time researching how Black wealth has remained a fraction of white wealth for decades.

Miah hired an engineering team to build Paybby before he came across Wicket, a small but fully operational challenger bank based out of Kansas. He closed the acquisition on Martin Luther King Jr. Day but declined to name the purchase price.

Wicket by Paybby is available on iOS devices and undergoing its final testing for Android. It currently has more than 1,400 customers. Lending Club Bank, previously Radius Bank, provides the underlying banking services.

Currently, Paybby offers deposit accounts with no monthly fees or minimum balances, no overdraft fees and early access to wages. But Miah plans to build on Wicket’s ability to automatically categorize spending data for users by integrating financial advice, such as suggesting to users how to allocate their money. He also wants to introduce a feature that temporarily sweeps excess cash into stocks or cryptocurrency so users can earn a higher return, and then return the cash when they need it for spending.

Another feature will be aimed at customers who rely on the Supplemental Nutrition Assistance Program, or SNAP, so they can use Paybby’s debit card for their benefits. Miah’s idea is that different “wallets” in the app will portion out the money into different use cases, including SNAP benefits that cannot be used to purchase alcohol, tobacco and other prohibited items.

“But when you hand the card to the grocery store person, they won’t see the difference,” he said.

He is also in talks with know-your-customer compliance software vendors, including one called Listo for the Latino market, to qualify customers with thin credit files.

Miah plans to apply for a national bank charter by April.

The second piece of his strategy to serve customers of color is as a marketing agent for PPP lenders, namely Carver Federal Savings Bank, a $672.7 million-asset bank. Paybby also works with the $1.5 billion-asset Blue Ridge Bank in Charlottesville, Va., and Lendistry, a CDFI.

To source women- and minority-owned small businesses, Paybby targets these customers with ads on social media and works with community organizations such as Alignment Chapter, a nonprofit that helps single Black mothers.

In Carver’s case, Paybby recruited the Toronto-based Boss Insights to provide an application portal on Carver’s website that pulls in the owners’ financial information by logging into their accounts with their consent. Boss also provides a portal on Paybby’s website that gives business owners an idea of whether they will be approved.

“Paybby and Carver gave us the ability to make sure that money gets into the hands of people who would not necessarily have access to the same capital,” said Keren Moynihan, CEO of Boss.

Michael Pugh, the president and CEO of Carver, says his bank used basic underwriting software to help originate loans during the first round of PPP, but his team also spent long hours doing manual work.

“We kept asking ourselves, how do we become more efficient and allow technology to help us support the customer interface?” he said. “The partnership has helped us navigate through origination, build intuitive processes for customers to apply, and make closing much more streamlined and efficient.”

Pugh says Carver processed 220 applications in the earlier rounds of PPP but has shepherded through well over 300 applications in the current round.

“More than 40% of Black and brown businesses could be at risk for failure because of the pandemic, specifically small businesses, so we know this program is extremely important,” he said. “The support of Boss and Paybby allows us to make a big difference.”

The partnership is also personal.

“Having been reared by a powerful woman who was a single mother by circumstance, not by choice, and seeing how she ran a business while taking care of me, I’ve always known it’s extremely important for women entrepreneurs to have access to credit,” he said.

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