While most consumers don’t much think much about the monthly fees they pay to their bank, over the course of a year those small fees add up. The average annual fees at the Big 10 Banks clock in around $144 per year, or $12 a month.
And while it is easy to assume that $12 is not a make or break amount for most mainstream banking customers, the reality is that actually can break the bank for consumers on limited budgets.
“Typical fees add up for people who are on budgets. Fees and minimums can even prevent people from opening a bank account,” Vinay Patel, Chief Executive and Co-Founder of Bee, told PYMNTS.
“And it isn’t just a problem for people considered to be on the financial fringes to have a regular savings or checking account, because often it isn’t just a $12 fee,” Patel noted before further explaining that even very responsible customers forget that maintenance fees come in right at the end or beginning of the month when bills tend to be due and balances run low.
“Suddenly that $12 turns into $70 in overdraft charges and now that bank account costs $82 a month and not $12 a month. That is simply not a reasonable cost, and it is one that will mostly likely cost those who can afford the least.”
But Bee thinks it can do better and has just completed a $4.6 million capital raise consisting of two rounds of seed funding to help build a better — and fairer — online bank.
Bee provides customers with basic retail banking services — checking and savings accounts and debit cards, paired with financial services — all targeted to working class consumers. But it also removes many of the obstacles that keep lower earning accountholders away from banks by making deposits easy and immediately recorded, and without the laundry list of fees.
“Bee doesn’t carry the same overhead as a big bank, or even a small credit union. So there are no minimum balance requirements or overdraft fees. We also make it easy to deposit a check with a smartphone camera so that consumers can actually see those funds show up and be usable within a half hour of deposit,” Patel noted.
“The point of having mobile services that are lightning fast with 24-hour wait was never clear to me.”
Bee customers do pay ATM fees, but are given two free withdrawals per month. Patel said that unlimited withdrawals aren’t as sticky a feature as one might imagine for the working class consumer who Bee is targeting.
“Features like unlimited ATM withdrawals from bank ATMs or free withdrawals at a bank branch can end up costing people if they have to take a subway ride to reach a bank ATM, the CEO said.
“If you walk around downtown Brooklyn, Bed-Stuy, or Grand Concourse in the Bronx, you don’t see bank ATMs or branches. Those are 25 blocks away.”
Bee is an online bank, but it has been dabbling in pop-up services of late, but in neighborhoods that aren’t often targeted by the here-and-gone retail model normally associated with pop-up stores in urban areas.
“New York is one of the premier cities in the world, but the reality is even here there are neighborhoods that are essentially financial service deserts. Our pop-up operations are an attempt to irrigate those areas — and we have between 10 and 20 staff members out there to sign people up and help get people banked.”
A Bee account isn’t free; the startup charges around $6 a month, but believes that is reasonable.
“We charge the same fee, every month, no matter what. That fee will never turn into an unexpected $50-$100 in other fees, and it isn’t dependent on behavior. Consumers are OK with paying fees. They just aren’t OK with fees that are unpredictable and start to cut into their money for living.”
Going forward, Bee is looking to expand past New York and to begin recruiting customers in San Francisco, Oakland and Los Angeles. It will use its combined $4.6 million in seed funding to fuel its first big expansion.
The business may also expand into consumer loans into the future, though for very small dollar amounts.
AXA Strategic Ventures’ Drew Aldrich, a Bee investor, noted that in the long term Bee is an exciting opportunity for investors not just for the services it can offer today, but for the increased menu of financial services it could offer going forward.
“Too many people are reliant on payday loans today,” Aldrich said, “And some banks just don’t want to deal with evaluating risk in this market. But Bee will have knowledge of deposits and transaction data firsthand and will know which customers are a good risk.”
Patel demurred on his firm’s potential future in lending, saying for the time being it wants to focus on building better banking for groups that are traditionally underbanked.
“I think for a long time we have taken for granted there are consumers that just can’t be banked and an idea it was their problem. And now we are saying ‘well, wait a minute, if consumers can’t get banking services, that means something is wrong with banks, not consumers.’ We want to be part of that solution.”
Investments for Week 11-27-15
Not a bad haul for a holiday-shortened week. For the period that ended Nov. 27, the Investment Tracker saw activity to the tune of $379 million, which was fairly well divided between the two segments we cover — with 52 percent in B2B, and the remaining 48 percent to FinTech.
Banking dominated the week’s activity, with Atom Bank, a mobile banking startup/app firm based in the United Kingdom, raising $128 million through a group of investors ahead of launching its service. The consortium of companies putting money into the firm were led by BBVA, the large Spanish banking firm, with $68 million of the tally, representing a 29.5 percent stake in Atom, and valuing the online enterprise at roughly $230 million. Other investors that contributed to the funding included Toscafund, Marathon and Polar Capital. Atom plans on an early 2016 launch, according to news reports. Separately, Lighter Capital got a bit heavier, investment wise, raising a bit more than $100 million to create a fund aimed at investing in growing technology startups. The fund sprang into being from the coffers of Community Investment Management. Lighter Capital’s business model is a bit different than that of other venture capital funds in that it takes a percentage of revenues from the investee, rated on a monthly basis, rather than an equity stake. Rounding up the triumvirate of top deals in the week, Key Capital took in enough to raise roughly $84 million in capital for a fund that will back fast growing small and mid-sized enterprises. Below is a list of the “Top 5” investees, as measured by deal flow.
The fact that a few of the heavy hitters this past week came in the guise of investment funds, raising powder to invest in startups and small to mid-sized companies begs a question, or possibly a few: Could seed funds be getting excited about 2016, and looking past the cautionary tales of unicorns and exit strategies and valuations? Time will tell, but of course we are just about to turn the page into 2016.
All told, the month of November, absent the single, last day, had just over $2 billion in investment activity, with $1.5 billion of that coming in the FinTech realm, dominated by banking and fraud, with about 79 percent of that amount – and that’s no surprise, given the mounting evidence and fears over financial security and also banking’s efforts to get bigger and a bit more tech savvy. See below: