Whether you realize it or not the millennial generation that grew up amidst the financial collapse is extremely averse to the idea of credit and obtaining credit cards. For an financial economy that is largely driven by the ability to track an individuals credit this can prove to have massive implications for society at large in the coming years.
Luckily, there are innovative firms like Float that are looking to tackle this very issue with an innovative approach to providing an ability to build credit through a debit card.
S.I.C was lucky enough to have an opportunity to sit down and chat with Co-Founder and President, Kevin Bass of Float.
Check out our discussion below and if you are in need of a product to help you build your credit look no further. Sign up here.
CL: Kevin, thank you so much for joining me to discuss with S.I.C. your revolutionary new financial service, Float. Can you tell us a bit about yourself and what gets you excited about building a company in the Fintech ecosystem?
KB: While in college at LMU, Max Klein and I successfully launched and sold a business. It was a great entrepreneurial experience, but all the time spent on it came with consequences. Both of us never bothered to get credit cards. From there, the process was a nightmare for me. I had a lot of student debt and kept getting rejected. As a result I became a chronic over-drafter. It took me a full year and a half after graduating before I was able to get my first card.
Having directly experienced this frustration, I'm excited to help the millions of people who are suffering from the same situation I was, lacking access to quality, affordable credit products. It's a massive opportunity to reinvent the wheel for the next generation of financial consumers.
CL: Float is a really unique offering. Can you tell us a bit about how you came up with the idea, what the idea is, and why you decided now was the time to pursue it?
KB: Float is a mobile app that can underwrite and issue lines of credit in 180 seconds or less. Simply connect your bank account, enter some personal information, and from there you can transfer funds to your debit card instantly. There is also no reliance on FICO to determine credit.
We offer affordable, personalized amounts and report our members payment relationship with us to the credit bureaus, helping them build credit over time.
In terms of timing, we mulled the idea over and researched the tech that was available to us. It turned out the tech needed to pull this off had just come to market, so we were lucky in that sense.
CL: What do you think it is about credit cards and credit that scare so many young millennials and how does this help to alleviate that issue?
KB: This hesitancy around credit for millennials is primarily driven by the fear of going into debt. It’s something I’ve experienced myself. We grew up with parents telling us to not get credit cards, spend within our means, and avoid debt at all costs.
These values are instilled in most millennials. After the recession many have become terrified of interacting with credit cards altogether. Also the fee structures for many cards are confusing and unintuitive.
To alleviate the hesitancy, our fee structure is straightforward and transparent. You just pay a 5% transfer fee, and have the peace of mind knowing exactly what amount you will have to pay back. This information is presented to you clearly in the app and we go above and beyond to remind our members before their bills are due. We also have an Auto Pay option, so they don’t have to worry about ever being late.
Beyond that, we charge no annual, periodic or monthly fees. Simplicity has enabled us to curb a lot of the skepticism.
At the same time, we’re looking to educate this generation so they can truly understand how valuable of a tool credit is if used properly.
CL: How does Float determine what type of line of credit can be offered to feel confident it will be repaid?
KB: We deeply analyze our users’ financial capacity to ensure they have the ability to pay back their line of credit in 30 days. We don’t offer more than someone can afford. That’s how typical credit cards trap people in debt.
CL: On average, what is the typical loan amount of a Float user, and what are the typical use cases of a these users?
KB: Our credit lines range from $50 to $1000 and use cases are all over the map - rent, textbooks, vacation, shopping, groceries, etc.
CL: Float seems like it is targeting a millennial consumer, but what has your experience been in terms of your growing user base?
KB: Our product certainly benefits millennials and those who are just getting started on their credit journey. We’re also serving individuals who are unhappy with their existing credit offerings. We’ve experienced steady growth over the two and a half months we’ve been in market.
CL: Can you describe exactly what FICO is, how you help to build an individual’s FICO score and the implications of having good credit for an individual down the road?
KB: FICO is a score that 98% of lending or consumer lending decisions are based on, which includes several financial factors about an individual. We report our members payment relationship to the credit bureaus. This allows them to establish a credit profile with FICO starting with lines as small as $50.
Having good credit affects many aspects of your life – from getting approved for a lease on an apartment or car, to getting cable/internet or a new cell phone. The sooner you start building credit, the better.
CL: So I know that there are many new services like Venmo and PayPal that will connect to an existing debit account and allow people to transfer money between friends, can you explain how Float differentiates from those types of services and how this is really a unique offering?
KB: So Venmo, Square Cash, all the peer-to-peer payment platforms are just that. They are for friends to pay friends and transfer money. Float is a credit product. It’s money you don’t have to begin with; a credit line that lives in the cloud that you can access whenever you need to.
We’ve heard people make the comparison a few times, but they are completely different products.
CL: How do you think about your core consumer? Is it limited to a millennial type audience, or do you see Float being something to serve the broader underbanked population?
KB: We believe our product has mass appeal. 70% of Americans are living paycheck to paycheck and 58M American millennials don’t have a credit card.
CL: How are potential consumers of Float responding to the value proposition?
KB: Every active member we have spoken with has given us phenomenal feedback. The instant transfers are really impressing people. They also like how cheap it is to get a line of credit with us compared to other offerings they’ve explored.
CL: One of the features I suspect is integral to creating a strong user experience is speed that you highlight as being quite rapid. What are some of the challenges of trying to provide such a fast approval of a line of credit?
KB: There are a number of unforeseen challenges we’ve run into. We have to manage multiple vendor relationships in order to make transfers occur instantly which is extremely tough.
Additionally, we are managing lending capital in a high growth phase, which is challenging.
CL: As the team continues to build out the Float service, what other services do you want to be able to provide users with? Is this something where you would upsell consumers with credit cards and other loan products as they become more financially developed?
KB: By providing a great experience for early stage banking consumers, we feel they’ll be more accepting of other banking products such as revolving credit cards or depository accounts down the line. We’ll get there when the time is right.
CL: So the Float team is located in LA, I’d like to hear a bit more about why the team has decided to build Float in LA rather than Silicon Valley. What are some of the benefits of being in LA?
KB: That’s an easy answer. Max and I are from LA. We are huge advocates of the LA tech scene. We wanted a home grown company that achieves scale like those in Silicon Valley because that’s lacking and we want to show the VC community that LA is a viable technology market because VC is pretty sparse here as well.
Los Angeles is also known for driving pop culture in America, which puts us in a great position to build an awesome, relevant financial brand.
CL: I see you guys received a seed investment from 500 Startups, can you tell us a bit more about that experience, that’s a pretty awesome VC firm?
KB: We were in Batch 16. It was an amazing experience. The staff over there is great and the access to other entrepreneurs and potential investors is invaluable. Also, the mentor sessions and other programs they put on are great. I highly recommend it to other entrepreneurs.
Batch 16 was actually the first batch of startups with a dedicated Fintech track. We were able to take advantage of specific FinTech events that weren’t available to other companies.
The Minute Rundown with Kevin Bass
CL: If you could provide one lesson to someone considering starting a company what would it be and why?
KB: When we were just starting Float, I heard that things will turn out to be twice as hard and take twice as long as you expect them to. I figured Max and I would be the exception, but that hasn’t been the case. Other entrepreneurs should know to plan for a long, crazy road ahead.
CL: Since you are in the mobile finance space, what other mobile finance companies really excite you?
KB: I really like what Acorns is doing, it’s a very strong concept. They have great design as well.
I also like what Digit is doing with its automated savings tools. It’s a unique offering and their traction early on has solidified that it is a viable strategy.
CL: What do you love most about starting up and what is the worst part about it?
KB: I would say the worst part about it is asking people for money. If we could fund the whole thing ourselves that would be awesome.
The best part is the experience as a whole. We have the freedom to enjoy being entrepreneurs. We’re not working 9 to 5, we’re building a business from scratch and answering to no one but ourselves.
In speaking with Kevin of Float, it became quite clear to me that Kevin and Max are passionate about the cause they are investing themselves in. They recognize that now is the time to prevent the immensely negative effect that a generation without credit could have on the American economy.
As the launch continues, here at S.I.C we will have our eye out for what comes next as the Float team continues to expand the reach of this financial product that is positioned well to be a game changer.
Thanks Float for the work you are doing and for bringing about positive change in the financial landscape.
And be sure to sign up here.