FinTech Profile: Kabbage, the fast-growing unicorn
[image: Kathryn Petralia and Rob Frohwei]
This week FinTech Magazine looks at American fintech Kabbage, the innovative cash flow unicorn.
[image: Kathryn Petralia and Rob Frohwei]
Fintech company Kabbage is a business lender founded in 2008 by Kathryn Petralia, Rob Frohwein and Marc Gorlin. Kabbage has a particular focus on lending to small companies. The company has ascended to unicorn status after a US$1bn valuation; an achievement that also places Petralia as the 97th most powerful woman in the world. But what exactly separates Kabbage from its competitors?
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The Forbes Fintech 50 2019-listed company uses innovative AI technology to make small business lending both more efficient and more profitable. Kabbage is capable of making loan decisions in 10 minutes, rather than the weeks that banks take. According to a survey by the Federal Reserve Banks survey on small businesses, online lender use has grown exponentially, from 19% in 2016 to 32% last year, meaning business looks good for Kabbage. Since it was formed, the fintech has lent as much as $8bn and continues to evolve rapidly as it launches new cash flow needs prediction tools. All Kabbage business loans are issued by Celtic Bank, a Utah-Chartered Industrial Bank, Member FDIC.
In an interview with Kathryn Petralia, Kabbage and Eric Schurenberg, Fast Company and Inc, Petralia shared that about 80% of the loans are approved in under eight minutes from companies that are generating around $5,000 a month.
Be sure to check out the interview for more on how Kabbage leverages data to achieve these fast approval times.
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Stripe backs Step - the digital bank for teens
The Series C round raised US$100m in capital from a number of backers, including Coatue, TikTok star Charli D’Amelio, actor Jared Leto, and Will Smith’s Dreamers VC, for the enterprise.
Step provides a free FDIC-insured bank account and Visa card to teenagers. The accounts are backed by Evolve Bank and there is no subscription charge for its usage. Users don’t pay for their accounts and there are also no overdraft fees.
The mobile banking app enables parents to set controls and limits on spending and encourage responsible finances. According to data released by the company, 88% of the platform’s users say this is their first bank account.
To date, Step has seen great success in the marketplace. The company has raised more than $175m from investors and now has 1.5m users.
Stripe, which was founded by Irish brothers Patrick and John Collison, previously led Step’s $22.5m Series A round in 2019.
Step's Series B funding round also brought in $50m, and has a distinctly celeb-tinged reputation with investors including Justin Timberlake and the pop duo The Chainsmokers.
Users get access to a free, FDIC-backed bank account, a spending card and P2P payments platform to send and receive money instantly.
CJ MacDonald, chief executive of Step, said the company is aiming to improve the financial futures of the next generation. “Step is the only banking platform that enables teens to start building a positive credit history before they turn 18 and does not charge fees of any kind.
He has previously spoken about the importance of financial literacy for young people. “Money is just one of those things where I think the more educated and equipped you are early, the better decisions you can make down the road,” he told . “And you can also prevent yourself from making costly mistakes. I mean, the average American doesn't have $400 in emergency savings and pays $350 a year in banking fees. If we can help this next generation just ultimately be smarter and more educated as it pertains to money, I think we'll all be better off.”
Kyle Doherty, managing director at General Catalyst and Step board member, explained, “Gen Z is flocking to modern financial solutions that can be easily embedded within their digital lives and Step has a unique model for how to do this right.”
The news follows on from Stripe’s recent announcement that it plans to acquire TaxJar. The fintech, which builds software for online businesses that automates the reporting and filing of sales taxes, will most likely be integrated with Stripe’s billing services.
Currently, No terms have been disclosed but the Boston start-up had raised more than $60m from investors including Insight Partners.
Stripe chief financial officer Dhivya Suryadevara said of the move, “With TaxJar, we will help millions of internet businesses running on Stripe with their sales tax and make it easier for them to sell internationally.”