Home CompaniesB2B Backstage Capital-Backed CapWay Moves to Atlanta As It Expands Its Digital Banking Offerings

Backstage Capital-Backed CapWay Moves to Atlanta As It Expands Its Digital Banking Offerings

by Muriel Vega

Tech entrepreneur and app developer Sheena Allen grew up in the small town of Terry, Mississippi, where financial institutions are few and far between. At the time, she didn’t think much about where her family and friends did their banking.

According to 2017 statistics from the FDIC, 16 percent of households in Mississippi are unbanked, choosing instead to use “predatory services” like corner store check cashing in their neighborhoods.

In Terry, for example, there’s only one small local bank.

“When I came back to visit recently, I realized just how many people were using alternative services outside of banking,” says Allen. Without a bank account, users may have a difficult time providing proof of income streams and credit scores for milestones like buying a home.

Allen founded her first startup, an app development shop, while still in college. After moving to Silicon Valley, Allen realized it wasn’t just rural communities that were underserved by banks. Inner city areas across the country, most of which are home to majority Hispanic and African-American populations, are also affected. An FDIC survey found that more than 15 million adults in the U.S. go unbanked.

This community spends $9 billion in payday loan fees, where interest rates can be upwards of 500 percent with very short pay back terms. For example, if someone goes to cash a $500 check, they may have to pay upwards of $25 to access that cash.

“I wanted the next generation to have a better option,” Allen says.

In 2016, Allen founded CapWay with co-founder and fellow Mississippian Timothy Lampkin. The mobile-first platform is aimed at younger generations (think older millennials and Gen Z) in those unbanked communities to help them break out of the predatory economy cycle.

“We’re going to be the first introduction to banking for a lot of those people. Our go-to market strategy is to work with schools, community organizations and cities and expose them to neo-banking,” she says.

Allen is talking about the neo-banking movement, a 100 percent digital and mobile banking experience that doesn’t rely on bank branches or high overdraft or balance fees. The main customer for these digital banks: millennials.

CapWay provides a low-fee banking option for its users along with a debit card, or allows them to link an existing bank account to the platform. Once an account is set up, CapWay will provide customized recommendations based on spending habits and help change behaviors that may be detrimental to their financial future.

Allen hopes to provide a robust amount of relevant financial literacy content, as well, that is tailored to the audience. School and community partners will pay for that curriculum to be delivered to students. By approaching revenue in both B2B and B2C models, the startup also plans to host sponsored content and paid partnerships.

CapWay’s competitive advantage, says Allen, is that her team not only understands the problem at hand, they understand the people with this problem.

“The majority of us are from areas that we’re looking to serve. We know our audience. There are a lot of factors — from loans with higher interest to redlining — of why minorities don’t use banks. Understanding that and coming from those communities makes my perspective way different that someone from a multi-billion dollar company,” she says.

That unique perspective already caught the eye of Silicon Valley VC firm Backstage Capital. The venture capital firm invested in the fintech startup’s pre-seed round, along with Liberty Bank, the second largest African-American owned bank. The company is now working on closing their seed round.

Recently, Allen decided to move the team to Atlanta after being impressed with the talent coming out of local universities like Georgia Tech and Morehouse. While she has a full rolodex of connections in Silicon Valley, she knew she wanted to grow her company closer to her customers.

“I’m from the South, I love the South. But also, when you look at the numbers, this region has the highest population of unbanked or underbanked residents,” says Allen.

Following their official move this January, CapWay will be publicly launching a new gamified micro-lending offering. “While this is not a big focus for us, we want to make we’re covering every part of the ecosystem,” Allen says.

CapWay is currently in beta with a full release coming in early 2019.

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