The company’s Series A and Series B rounds were led by Khosla Ventures, and there was participation from Thrive Capital and Affirm CEO Max Levchin, according to the report.
Split Pay’s venture is an effort to make the consumer economy function more like the “invoice-based” business economy by reconciling the disconnect between large bills, which come once a month, and paychecks, which are typically received twice a month, the report said.
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The company is making a buy now, pay later (BNPL)-style wager that artificial intelligence can expand underwriting but keep losses in check, according to the report.
“We believe that AI is going to blow up underwriting, so we spent our first two years like a lab building a new foundation model focused on people under 40,” said Split Pay Co-Founder and CEO Andrew Borovsky, a former Block/Cash App executive, per the report. “What we found was that our average consumer had $90,000 of income and generated around $2,100 in cash flow but was still struggling and living paycheck to paycheck. The biggest reason was the timing of bills.”
Split Pay allows renters or mortgage holders to divide their monthly payments into two installments. The company charges users a fee. In addition to housing payments, the company’s services can also be applied to expenses such as car payments.
PYMNTS CEO Karen Webster examined the role bill timing plays in the lives of paycheck-to-paycheck consumers in a Wednesday (Sept. 9) column. These consumers can be broken down into three groups, including 41% who chalked up their financial circumstances to everyday spending, 31% who cited a short-term financial shock, and 28% who are dealing with long-term decisions tied to housing, education, childcare, family support or debt.
“For households at the top of the affordability ladder, the problem is usually timing,” Webster wrote. “Bills land on fixed dates and paychecks may not.”
PYMNTS Intelligence’s “Wage to Wallet Index: Liquidity Stress Splits Higher Earners and the Labor Economy” found that nearly a third of hourly workers incur late fees, overdrafts or penalty interest of about $50 at least once a month.
“BNPL used responsibly as working capital can bridge that gap,” Webster wrote.
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