Over 30 million Americans are underbanked, this young entrepreneur seeks to change that
Blacks and other minority groups remain largely outside the banking system. This is due to the few banks operating in black communities compared to majority white communities. According to the Federal Deposit Insurance Corporation (FDIC), black and Hispanic households are more likely to be unbanked or underbanked.
In a survey published in 2015, the FDIC found that more than 15 million people do not use the U.S. formal banking system. However, according to the Center for Financial Services Innovation, underserved people in 2016 spent $ 173 billion in interest and fees, according to Financial Services Innovation.
Sheena Allen knows this challenge well in the community where she grew up. She grew up in Terry, Mississippi, where many community members did not have bank accounts or did not use the formal banking process for transactions. Instead, they relied on cumbersome solutions like payday loans and check cashing services.
In 2016, Allen noticed how over-reliance on alternative banking services deprived people of interest and fees for cashing checks. In her quest to solve this challenge, she created CapWay not only to provide a solution for unbanked and underbanked people living with paychecks, but also to provide financial education.
She was convinced that it is possible to use banks, but without good financial knowledge the problem may only be half resolved.
“I know this problem from a personal point of view, from my family and friends, but I did not know about this problem from outside of Mississippi,” Allen, who spent a year traveling to the United States, told CNN. United States looking for the problem.
She designed the app in such a way that users can connect existing accounts to the app or get a prepaid card from CapWay. According to Allen, while the app is for everyone, it is for Millennials.
While there are a number of fintech apps looking to provide banking solutions to underserved communities and people who still use the non-traditional banking system, Allen said his is quite different from what’s already in it. the system.
“We have a B2C and B2B2C orientation. Our acquisition channels and the way we seek to partner are different from what you will see with most mobile banks. We also offer tools and resources that are very important in building financial health. An example would be financial literacy. I firmly believe that even giving people access to banking services, if you don’t educate them on how money works, there will still be a disconnect and just more opportunities for them to make mistakes with money. money, ”she told NYC fintech. women.
Allen raised $ 625,000 from Backstage Capital to fund his business. Backstage Capital is founded by Arlan Hamilton, also from Mississippi. “She might be underrated when she walks into the room – she’s a Southern Belle – but she’s approachable and knows what’s going on in the real world,” Hamilton said, according to Inc. “That’s so dear to be poor. ”
The app is currently in the testing phase and will first be rolled out to iOS, Android, and mobile web users in Mississippi, which CNN says has the most unbanked and underserved residents.
Allen hopes to officially launch the app later this year and partner with schools, employers, financial institutions, and community organizations to register his target population. In addition, the company intends to make money through subscriptions, prepaid card fees, and advertising and sponsored content.