Investment Update: Clerkie - The AI-Powered Financial Automation Platform Repairs America’s Broken Debt System
The average American debt levels continue to grow at alarming rates. According to the Federal Reserve Bank of New York, total consumer debt for American households is $16.5 trillion and over two thirds of consumers in the U.S. are in debt.
With inflationary rates at levels not seen since the late 1970s, increased cost of goods already pushed higher by global supply chains driven by shortages and the ongoing COVID-19 pandemic, average debt is up across every category. And as Americans strive to manage their debt load, financial institutions issuing such loans witness delinquent consumer debt levels pegged at $130 billion rapidly expand.
Financial Health Network 2022 Pulse data reinforces that only 31% of Americans consider themselves financially healthy and the vast majority live paycheck to paycheck. Not surprisingly, the majority of this population is contending with significant debt burdens and is often forced to endure the perils of delinquency and predatory collections tactics. The process is often predatory and involves poor outcomes for the borrower and financial institutions alike:
- For the borrower, collections could involve employer outreach, negative credit impact, wage garnishment and potential lawsuits.
- For the bank, approximately 10-15% of outstanding debt in collections is recouped resulting in the loss of hundreds of millions per quarter.
Clerkie’s product interfaces with a borrower earlier in the funnel and leverages consumer data provided by financial institutions to proactively surface debt payment alternatives. The platform recommends the most optimal workout option for each specific borrower and helps them to avert delinquency, avoid the formal collections process, and build their credit scores.
Clerkie’s process not only improves the debt repayment experience for the user but also results in increased repayment volume on delinquent debt. When we first met the Clerkie founding team at their seed, we were struck by the rare combination of strong mission orientation driven, personal experience managing untenable debt coupled with financial services and technology expertise. Having come from McKinsey where they advised large financial institutions on their digital transformation, they recognized the power of automation and modernized infrastructure to improve critical objectives such as delinquencies materially.
On the personal front, Clerkie’s CEO and co-Founder, Guy Assad, experienced first-hand the challenges a borrower faces once trapped in the current debt cycle. A recent study by Aspen Institute details how U.S. debt disproportionately impacts communities of color. As Haitian immigrants, Guy and his family experienced this harsh reality. Clerkie was launched to change this equation and help break the debt cycle for all Americans.
The team leveraged its understanding of what type of infrastructure financial institutions needed and personal experience managing debt to develop a robust automated platform that is intuitive, offers actionable insights, develops customized debt-work-out plans and seamless integration into the legacy financial institution and tech partner stacks.
We are privileged to have partnered with the Clerkie team from the very beginning when the product was still in prototype. It has been so rewarding to see the robust financial performance and meaningful impact the platform has had on borrowers and lenders alike.
In addition, we welcome new investors, LeftLane Capital and Wellington Asset Management to the Clerkie journey. Clerkie’s $33M Series A raise is an exciting milestone for the company amidst a challenging fundraising environment, and its oversubscribed round reflects the company’s hard work, stellar financial performance, and defensible market position.