Digital banks, such as the Chime and Square apps, have added millions of users, offering simplified mobile accounts without the annoying fees associated with traditional banks.
Current, founded in 2015 by former Wall Street trader Stuart Sop, has been offering free mobile check accounts since the beginning of last year.
It saw customer growth during the epidemic, adding more than 100,000 users a month in April and May, Sop said in a telephone interview. The company recently exceeded 1 million active accounts and expects to reach 2 million this year, he said.
“Anyone who is considered an essential worker simply fits our profile by accident,” he added.
“They work at Walmart or Amazon, they’re porters, installers, Uber and Lyft drivers, UPS employees, nurses or the military. Our growth over the last two months has been abnormal. ”
The pandemic acts as a catalyst for the trend: the constant migration of most daily banking activities to mobile applications and online portals. This has boosted digital technology for both huge institutions such as Bank of America and new users, including Current.
But Current and its competitors have grown, taking advantage of the fact that for people living on a paycheck, billing with large banks can be a bad deal. Lower-paying consumers often struggle to maintain the required minimum balances or be hit with overdraft fees.
The company’s business model – essentially a technology layer over an account that is actually from a separate institution supported by the FDIC – allows it to focus on making money from debit transactions and premium subscriptions. Most traditional banks require customers to keep thousands of dollars in balance sheets to avoid maintenance fees.
Like some of its brothers in the fintech sector, Current gives consumers access to their salaries up to two days faster than traditional accounts, up to $ 100 free overdrafts and free access to thousands of ATMs. These features proved to be a hit among people with lower wages.
“We are lowering the barriers to financial inclusion,” Sop said.
“We focus on the inequality of wealth, without explicitly saying we do. It just has to be good business. ”
Approximately 50% of the bank’s consumer base is black, Sop said, citing consumer photos and trade data. The average age of current customers is 27 and they are grouped in cities, including Atlanta, Dallas, Chicago, Los Angeles and Brooklyn in New York, he continued. Consumers spend about $ 1,100 a month, almost entirely on groceries, he added.
The company’s exponential growth – with Sopp estimating annual customer growth at 1,300% – has attracted new investment from Foundation Capital, a Silicon Valley-based venture capital firm. Until Sop reveals the size of the investment, he claims that the foundation’s partner, Angus Davis, is joining the Current board.
“With a third of the U.S. population living on a payroll, Current has a great opportunity,” Davis said in a statement.