Millennial-Focused Digital Bank Empower Finance Raises $20M

San Francisco-based Empower Finance, a mobile banking app aimed at helping millennials save wealth, has raised $20 million in a Series A funding round led by Defy Ventures and Icon Ventures, according to a report. The Founder and CEO of Nubank David Velez also participated in the funding round.

The company, which was founded in 2017, is run by a former Sequoia Capital partner named Warren Hogarth.

Empower Finance has 35 employees and 600,000 users on the platform. The company uses artificial intelligence (AI) combined with human financial planners to help the younger generation grow wealth. It offers a savings account with a 1.6 percent annual percentage yield that promises no minimums, no overdraft fees and unlimited withdrawals.

The system analyzes account holders’ bank and credit card accounts and provides a spending analysis, along with recommendations for how much they should save into which account, how to cut costs and what to do when they overspend.

The digital banking field is fraught with competition. Competitor Chime announced in December that it is worth $5.8 billion after recently closing a financing round. The opportunity is large in the sector, as digital banks represent only about 3 percent of the overall market.

One reason for the growth of digital banks is that they charge fewer fees than traditional banks. Empower, for example, charges $6 per month, and Hogarth said users can save $300 per year in fees – about $1,300 annually – that they would otherwise pay to a traditional bank.

“If you look at [the market] from the outside, it looks crowded. But the consumer financial services in the U.S. is a $2 trillion business, and we haven’t had a fundamental shift since maybe Schwab came along 30 years ago,” he said.

Previously, Empower raised an undisclosed amount of seed money from Sequoia, and then a $4.5 million funding round led by Initialized Capital.