By Nupur Dave, Gurnoor Singh Virdi, Zubin Chandra (Analysts 2020–21)
Angela Strange’s prophetic announcement that “fintech is eating the world” in the beginning of 2020, was borne not only out of observation, but also out of a deep social concern. The Andreessen Horowitz general partner describes a bifurcated banking system divided along socio-economic lines — one for the rich and one for the poor. We will be looking at two startups that are aiming to bridge this divide, trying to build a world where being poor is not expensive.
Out of $254 billion of VC investments in 2018, $53.8 billion dollars — or just over 21% — was poured into fintech. While the global fintech market was worth $127.66 billion in 2018, the industry was forecasted a compound annual growth rate of roughly 25% until 2022 ($309.98 billion).
Wealthtech is one of the fastest growing sub-sectors in fintech. Wealthtech refers to digital solutions that help enhance the wealth-management process. In 2020 alone, global VC-backed wealthtech grew from $450 million in Q1 to reaching $1.2 billion in Q2, a $750 million dollar increase. This windfall of cash is being driven by an impending shift in wealth ownership, from baby boomers and Generation X to millennials, a trend that the pandemic has only accelerated.
A small startup in the Wealthtech space well positioned to capitalise on this growth is BucksApp, founded by Sebastian Romero — a 2018 graduate from Babson College who has previously worked in Strategy and Business Analytics at Visa. The software is an application designed to help college students manage their finances, spend smarter, monitor their credit scores, and gain weekly personal insights into their financial investment. Their mission is to use computer-driven financing tools to help young adults solve their financial challenges.
Bucksapp is riding the growth trend of Gen Z and Millenials’ increased trust and reliance in personal banking applications by targeting college students, while aiming to be their first personal budgeting tool. The company has recently raised $2 million in their seed round and continues to grow rapidly as they spread to more colleges and universities. Competitors may include more typical budgeting apps such as Mint, and Slice.
Innovation in another fintech sub-sector, Payments, also has potential to help empower those who are economically disadvantaged. This vertical consists of numerous applications such as payment processors, card developers, money transfer platforms, and tracking software. Fintech firms are leveraging technology to expand access to services originally only provided by traditional financial institutions. There was a particular rise in the Payments sector during the Covid-19 pandemic, accelerating the shift from cash to contactless, digital payments. As of 2020, there are over 1.06 billion users of mobile payment software, with just 64 million in the United States alone.
An early-stage New York-based startup in the Payments fintech field is Clair. Clair is a social fintech platform that focuses on instant pay access as a service for human capital, ensuring that people who work from paycheck to paycheck are paid diligently. They want America’s 82 million hourly workers and 57 million gig workers to get paid as quickly as Uber pays their drivers today: instantly. This service, especially given the Covid-19 pandemic in which Americans were having problems with their two week payment cycle have found clair to be quite resourceful. Clair’s developed bundling strategy, which provides pay as a service, mobile applications to handle bank procedures, and digital bank accounts, has proven to be beneficial to delivering instant payments. However, Clair is in a fairly crowded space, with incumbents such as Venmo, and ApplePay, which also allow companies to pay their workers instantly. However, there are key distinguishing factors that may allow Clair to differentiate itself from its competitors. Unlike Venmo and Apple, Clair solely focuses on the connection between the employer and employee, and developing advanced requests to make the payments faster. Additionally, Clair’s bundle package, and integration capabilities with other applications through their open API distinguish their product from their competition.
Clair was founded by Harvard Alumni, Niko Simko, Erich Nussbaumer, and NYU Stern School of Business Alumni, Alex Kosteki. Clair has raised $5.1 Million USD to Date through seed funding. Their biggest investor was Upfront Ventures, investing 4.5 million USD in their latest seed round. Other Invector include WalkAbout Ventures, and the Founder Collective.