By Emmalyn Shaw
In the United States, there are more than 100 million low- to middle-income citizens who wish to build credit and savings, but historically have been underserved by major banks and fintech startups. The majority of Americans live paycheck to paycheck and at the end of 2020, 61% of Americans were at risk of running out of their emergency savings. Our portfolio company SeedFi is focused on breaking this cycle by offering innovative credit-building and savings services to build sustainable economic resilience.
SeedFi’s average customer earns $50K a year, yet they pay $460 a year in overdraft fees and payday loan companies charge them in excess of 400% APRs. Their income barely covers expenses and any misstep can set them back for years.
SeedFi launches today with a Credit Builder Plan, a service that creates important long-term savings habits. Customers can save as little as $10 from every paycheck, which is reported to the credit bureaus to build credit history and can generate $500 in savings in as little as six months. The company’s second product, the Borrow & Grow Plan, is the industry’s first digital financial product that provides immediate access to funds while also helping customers build savings and credit. It was designed to help end the cycle of debt experienced by many underprivileged Americans. It is a significantly more affordable option than predatory installment or payday loans.
In 2019, SeedFi offered beta products to thousands of Americans and helped these initial customers build more than $500,000 in savings – even during the current pandemic. After six months of on-time payments, SeedFi customers with no credit history established credit scores of 600, while those with existing credit scores and using less than three credit accounts increased their scores by 45 points. From early testing, SeedFi found that approximately half of the customers used the funds to pay down overdue bills while another 17% used the product to build their credit. Other most commonly cited use cases for the loans included: paying auto bills, paying medical bills, and building savings.
The SeedFi team is exceptionally well-positioned to be a leader among the new generation of service providers targeting the low- to middle-income consumer market because of its deep expertise in this category. CEO and Co-Founder Jim McGinley has over 16 years of experience building financial products targeted at low-to-medium income consumers at the executive levels at both Aura and Oportun, and was previously a Managing Director of Card Analytics at Chase and Capital One. SeedFi’s other executive co-founders also bring a wealth of experience bringing to market and scaling successful and impactful financial solutions.
We are honored to work with such a seasoned and mission-driven team to transform financial health and drive significant economic resilience for all Americans.