Founder Focus

Hello everyone, I'm Jade, your host and welcome to another episode of Founder Focus.

Today we are joined with our guest Sheena Allen, who is the founder and CEO of Capway, a fintech company for the underbanked.

Now, Sheena, thank you for coming on our show.

Thank you for having me. So very briefly, can you tell us what your startup does?

Yes, so Capway is a mobile bank. And our goal is creating financial opportunities for those who are underserved and overlooked.

So yeah, the core of what we do is banking, but we also build around that from financial education, to forecasting.

So really creating that fair ground for once again, those who are underserved and overlooked.

So let's educate our audience a little bit and provide some context about your market.

So according to the FDIC's definition of underserved market, apparently over 30 million US households are underbanked or unbanked, and without adequate access to traditional financial services.

And over 75% of Americans are living paycheck to paycheck. Could you illustrate for us what that means on a day to day basis for the users?

You have, that means people literally are not having access to proper financial tools.

So, you know, I speak a lot about like banking deserts.

So you think of a lot of most people in the largest cities, there's a bank on every corner.

So it's like you don't think twice, just there's a bank there, there's a bank, you know, I'm out here.

That is actually not the case everywhere. And so instead, you have a large amount of Americans who they're having to rely on predatory services, check cashing, payday lending, title loans, and or they're in areas where they have a bank, and it's probably like a credit union, a community bank, and those banks don't have the same technology infrastructure.

So you think of even especially a younger unbanked than someone who's unbanked, underbanked is younger, we're used to doing everything from our phone, we don't walk into branches.

So that creates an even bigger gap.

Then even with people who are in the bigger cities and metropolitan areas, who are around from your well known banks, they, that's what we kind of define more as you're over overlooked in addition to being underserved, because they can't afford really the fees and the part of banking with some of your bigger banks.

And so these are people who are having to spend a crazy amount of fees, really for alternative services, but a lot of times they don't have other options.

So tell me a little bit more about that. I remember this James Baldwin quote that it's, it's expensive to be poor.

Can you explain to our audience what that means with all these fees?

Yeah, so you know, the, I'll use a payday loan as an example.

So you know, the lot of times people will go and they'll get payday, they'll sell payday lender and they'll get a payday loan.

And payday loans actually can carry up to sometimes 400% APR, which is ridiculous.

So imagine you going to get $300, and you end up having to pay back almost $800,000, $900,000, you know, depending.

And I think people don't understand that people are paying this money back.

The issue is, however, they're paying money back for one, it's not being reported to the credit bureau.

So it doesn't show that you're paying money back.

And as you see, they're paying the interest they're paying back is absolutely crazy.

And unfortunately, what most people who don't really understand this audience know, they'll say things like, Oh, well, you know, you just work harder, or get an extra job.

And that's just not the reality. When you're when you actually understand that audience, a lot of them are working two or three jobs already.

So they're, they're, they don't have time because they're working all the time.

They get their money is going to our necessities, and then they're having to pay $10 to get their check cash, or they have to pay back, you know, double what they're having to borrow from a payday lender.

So it becomes extremely expensive to be poor.

I mean, that's what we think about is the poor people who are getting charged the overdraft fees, they're being charged a minimum balance fee.

So if you have money in your account, you don't have to pay those fees.

So like you're trying to have money, you're good.

But to not have money, you're being charged for not having money.

So so tell me about the services that that you offer. Yeah, so with the Capway, we are, by definition, we're a neobank.

And so with Capway, we don't do overdraft fees, we don't do minimum balance fees, there's no monthly fee, and we are a true debit, know that it's a true debit card, it's not a prepaid card.

But in doing that, not only are we offering services, we're not charging all these fees, but we're also giving them tools that are needed to become financially healthy.

And that ranges all the way from financial education. And the reason I mentioned financial education here is because you there's a lot of financial literacy that you will find it's available, you can Google it, there's other programs.

But what's really important about Capway's financial literacy is that we're giving them information.

But we're also giving them of course, the tools to put the education to use.

So I can actually say, hey, I see that Sheena is taking a course on budgeting.

And you know, in three months, I've noticed that she's gotten much better at budgeting her money.

No, she's increased her, she's decreased her, her wants, and she's spending more on needs, or she's saving up more money.

And so giving them information, but making sure they're able to put the information to use is a big piece of it, providing the resources.

So you know, we work with other people. So we have like affiliates, we have a marketplace, and being able to give them information and resource that they didn't know beforehand, because no one's ever talked to them.

You know, another quote, that's really, that's really big when speaking of this market is, it's hard to blame someone for what they don't know.

A lot of people just don't have access or don't know that type of information.

And so therefore, giving them the information, but giving to them, and we're meeting them where they are, I hate when people say no simplified or dumb it down.

You're not I'm not dumbing anything down, but I'm meeting them where they are, because they don't know.

And once again, it's hard to blame someone for what they just they don't know.

They need no sometimes they didn't know existed or that option was there.

Well, everyone goes from not knowing something to knowing something.

Exactly. Right. What are some of the future services on your roadmap that you're thinking about incorporating in the future?

Yeah, I'm probably one of the biggest ones that we don't offer now, it's going to be micro lending.

I think learning is huge for us, really on two different fronts.

One is getting people out of the predatory economy. So you already have a pathway, a pathway account, and you need that $100 to last you to, you know, next payday.

I don't want you to go to a payday lender anymore. I want you to be able to borrow $100 from pathway and not have to pay back so much in interest.

So that's really important.

And then the second thing is really important about our micro lending.

It is about behavior. So how can we even though they're maybe borrowing money, how can we see what they're borrowing?

And maybe how can we get them on a road that may be able to adjust some of their previous financial behavior that won't put them back in that position again.

And sometimes it's hard to do because sometimes it's just about I don't make enough money.

I work two jobs, I just simply don't make enough money.

Or maybe something we can cut out. Maybe it's, hey, you have what we know, shell cable bill of 160.

Maybe you can think about Netflix for $14.

But that's the that's the beauty of having been a neobank and being able to have that data and have that infrastructure, but also truly understand some of their pain points and how we can help.

So a long while back, I remember having a conversation with somebody who, who ran who was telling me what a currency exchange was, because he, one of the things he did on the side was he ran one.

And I, to my surprise, it wasn't converting, you know, US dollars to euros or vice versa, which was what I had, had first thought.

And what I what I found surprising in that conversation was he explained that, on the one hand, like, well, he explained that essentially hardworking, poorer people were subsidizing the, the bad actors, like, you know, he would make a certain amount for cashing checks.

And on the other hand, like someone would fraudulently cash a check, and he would suddenly be out like thousands of dollars.

And essentially, the honest, hardworking poor people were subsidizing the bad actors.

And so this is a multi-part question about building trust in a system.

So like building, building trust in an underserved financial system.

How do you like limit your exposure to fraud?

Or how do you do fraud detection in the user onboarding process? Yeah, so of course, you know, number one thing is, as a bank, people still have to go through the KYC process to know your customer process.

So that's number one. And then we definitely have different companies that we work with, where they're, you know, the number one thing they do is fraud, especially with working with traditional banks or neo banks.

And we make sure we're staying up to date on everything that's like new, the whole synthetic identity is like really big right now.

And so the first thing we did was like, hey, who right now has the best that we can go to and say, hey, we need to make sure that we can catch this super early.

And even when you know, you start an account with Capway, you know, we're still monitoring like those first few transactions, because usually, when fraud happens, a lot of times it happens in the first few transactions that someone does.

And so we have a lot of things in place from a security piece that we make sure that we say, you know, something that's very weird, this transaction is, they open up an account and did five quick transactions are trying to cash and check this doesn't know look right, it doesn't make sense.

So we have a lot of parameters in place from security piece to try to keep down as much as we can or fraud, which is not only because of, you know, the unbanked underbank, because once again, not everybody's like that, that's a huge misconception that everybody in that market is potentially a bad guy, but it's not the case.

It's also because of this COVID right now, you look at what's going on with, you know, people been out of jobs, and people, you know, are looking for money, people are getting desperate.

I mean, understandably so but you know, fraud is at all time high right now too.

So yeah, just keeping every you know, making sure we keep everything on lock all at all times.

I remember folks from from PayPal, explaining how fraud detection is like this arms race, and suddenly one day, you'll see all like a flood of signups from Eastern Europe and like clogging everything up.

And so have you experienced that as an arms race, like, you know, like playing whack-a-mole, like, suddenly, there's a new technique for people generating new account signups, and then you like, tamp one down, and you like, okay, we got this pattern sorted out, and then keep having to build up your defenses.

I mean, that's everybody. I think that you have dumb criminals, but they have some very, very smart criminals.

You know, the dark web exists for a reason.

I mean, those aren't, those are very, very smart people.

And they, the minute that some technology comes out, or some company comes out and says, hey, we figured out how to catch people that do fraud in x way, we're gonna figure out how to do it in y, like it's, it never ends.

And that's why you see, not just banks, but you see like the eBay's and the apples, they always have the bounty, we're like, they pay people so much money, if you can pretty much have, no matter what you do, how much money you're worth, because Apple is worth with almost a trillion dollars, are very high up there.

They're still trying to, they're still worried about hackers, committing fraud.

So we're no different.

We just have to always know that something's coming. It's not a thing of, oh, well, we heard about that.

And we got this two or three things we added in, we're good now, like, no, something else is going to come, it never ends.

So you're FDIC insured. So does that mean technically you, you are a bank, and you're a bank without a physical building, and the folks who are switching to Capway from predatory lenders will start to accumulate some interest and be in a position where they're, they, they're going to be wanting, like, savings account and investment vehicles and, you know, things that accrue interest, CDs, things like that.

Do you think your users will start to, you know, put pressure on you to offer these more traditional banking services and banking products?

I think so, for sure.

And it is, I mean, that's somewhere still in our roadmap. It's not where we are now, because we're still early.

But sure, in our roadmap, we want to be able to offer as much as we can.

I mean, I think every company knows what they do great.

I do it all. And there's some things that's not in our roadmap. So like, no, mortgages is not in our roadmap.

We'll, we'll have a great partner who we might send them to for mortgages.

As far as like those things, like investment vehicles, other offerings, outside of just checking and savings, anything that for me, how I look at as a founder, anything that falls in line with our mission, through technology, a very user experience, very, very great user interface.

And we can build it so it's very simple for the user. We will probably end up offering it at Capway.

But once again, we know what we're graded and we know like, what we work with partners for.

You know, I think in the US, it's not unusual to sort of compare Capway to say Venmo and Mint, or and also a traditional bank.

But in my head, I'm actually comparing you to like Ant Financial, because their initial market has a lot in common with yours.

Banking desert, users are like mobile first or like online primarily.

And they've grown into a $150 billion market cap company.

And they are part of what creates the cashless society in China.

They've gone on to do a lot of the sort of like interesting financing work by helping small merchants and, you know, beginning entrepreneurs get off the ground, especially in the underserved areas.

Is that something that is perhaps on your roadmap in the future, sort of entrepreneurship, entrepreneurship enablement in the underserved areas?

Oh, for sure. We, you know, I always tell my team, like, we're not gonna get too far ahead of ourselves.

But we talk about business all the time.

And it was, you know, the competition came up recently in because of the PPP loans.

And we thought about the PPP loans, I think, I want to say, was it less than 5% went to black and brown to the black and brown community.

And a lot of people that was in that market of the black and brown was trying to PPP loans, we talked to a lot of them at Capway.

And what we were seeing was that a lot of people in that market, they didn't have what was needed to file.

And so I say that it was, they had a business, but they were doing everything out of their personal account, they weren't doing anything in there, they didn't have a business account, or they never maybe filed properly.

And so there's the same way we find to literacy is from like a personal finance, literacy gap when it comes to entrepreneurship and microfinance.

And that's dealing with the market that we know that we're in.

And so we for sure will eventually get into like entrepreneurship, how do we get them, I just have personal accounts, but they are starting a business, get a business account, how do we educate them from a literacy piece, that you should file your business, and you should file it as an LLC, not as a corporation, we see that a lot.

And they're gonna be double text if you found like, he was found a corporation because they won't have ink behind their name.

And like, yeah, that's kind of cool until text time come and then. And so there's a, because that's what we see a lot, you know, the people that we're targeting, that Gen Z, that millennial, don't want to walk into bank branches, but with also the same audience who was like, starting the Shopify websites, and we're trying to sell clothes, and we're trying to sell who knows what else like, and that's what we're going.

So for sure, that does fall within the market of who we are. Awesome.

So that sounds like a lot of, so a lot of that is, 2020 has been quite an interesting year.

To say the least. So aside from some of the small businesses having, like having their difficulties with the PPP loans and such, how, what's it been like for your market, yourself, your company in 2020?

What kind of adjustments have you had to make from like working from home to, you know, all the other stuff?

You know, it was, it's funny because I would, sometimes I would go to the office in the morning.

I'm that person, like I'm usually the first one there, the last one to leave.

And not only because I'm the founder, just like, I'm a workaholic, which is probably still a fault to some degree.

But I was like, no, sometimes, sometimes I just want to work from home.

Like, I'm just going to stay at home one day, just work from home.

And now that I'm working from home every day, I'm like, I want to go back to the office so bad.

Like, I'm ready to be back in the office with my team.

But we're still remote. So my team is, even though we're still here, all here in Atlanta, we're all remote.

The good thing about COVID, which I don't know if good and COVID should go in the same sentence, silver lining.

It has helped, I think people really realize the economic issues of America.

And when I say that, I remember when we were raising our last round of funding.

And I remember talking to investors, and I would talk about, you know, how many people were unbanked in America, and the income inequality from women, for minorities, for, you know, the wealth gap in so many different ways, even from, you know, you look at the map, and you look at where 50% of people in America stay, it's kind of like all in clumps, like, you know, like, it's like on the borders, almost.

And it's like, what about the other 50% of people in America?

Like, we have a huge issue here, especially as we're moving to a cashless economy.

And we are, so at Cathway, our acquisition is a little bit different.

So we're a B2C, but we also do a lot through B2B2C.

And one of our B2B2C channels is employers. And I remember before COVID, I would talk to employers, and I would say, hey, you should move your underserved employees away from payroll cards over to Cathway.

And then they'll say, well, why would we do that?

Like, you know, it's easy for them to sign up, you know, to get paid.

And I said, well, payroll cards are taking like prepaid cards.

So if they were able to be fired, furloughed in the case of COVID, they would go, if it's a student, they would go off to school.

I mean, so many different reasons, they will essentially be back to being unbanked.

In addition to sometimes the fees that come along with those payroll cards.

With Cathway, they're still not getting overdraft fees, they're still not getting minimum balance fees.

And so but they're also now into a banking system that will help them grow financially, like to be financially healthy.

A lot of employees kind of like, ah, we'll get back with you or maybe not.

And when COVID happened, and you had 40 million people in America who went unemployed, we had a lot of employees who reached back out and said, you know, I feel bad now because I know that my employees are back to being unbanked because they can't, the payroll card is only as great as a paycheck that goes on the payroll card.

And so I will say that the silver lining of COVID, I think a lot of the things that I was speaking to before COVID that unfortunately, I think a lot of people, I would say who live in the bubble almost, really understand, they understood after COVID.

It really shined a light on the problem.

Yes. I remember with the stimulus checks and they came out and I was seeing like all the articles and all the comments like Twitter, when they were announcing like how many people in America didn't have bank accounts.

And people were like, wait, people in America don't have bank accounts.

And I'm just like, yeah, people in America don't have bank accounts.

So as a matter of fact, anywhere from 30, 35 million, maybe more don't have bank accounts.

And so I do think it definitely exposed some of the economic issues of America.

Yeah, I'd like to dig into this a little bit more, especially seeing I see an audience question from Fallon.

What do you think is driving the lack of financial literacy in underserved communities?

I think the number one problem is for one that is, it's the way that it's been presented.

Most of us don't want to feel like we're being like, it's like textbook, I feel like, like literacy for the most part, like textbook financial literacy is how I call it.

I call it textbook financial literacy. And most of us are not into that.

Like most people don't like school. It's like, you know what I got to do, I can graduate and keep it moving.

So I think the way that it's been presented has played a huge role, which is why with Cathway, our presentation of literacy does not come off as financial literacy.

So I mean, it is financial literacy, but it's just the way we talk about it.

An example I would give is speaking of the stock market, I'll use the stock market as an example.

We don't start the conversation by like, hey, this is the stock market.

Stock market means X, shares means X, like that's not how we start the conversation.

Our conversation more so is how many pair of Nike shoes have you purchased?

How much was the last pair of Nike shoes that you purchased?

And it might be, I purchased a pair of Nike shoes for 200 bucks. And it was, did you know, you could have purchased X amount of shares for...

Of Nike.

Or, you know, that shoe that you bought. And a lot of people are completely shocked.

Like we've seen their faces. It's like, wait, I could have bought, it's $88, it's $89 to buy a share of Nike, because it goes back to people just not knowing.

I know with, we've done a program before COVID, an in-person program, and it was around assets, liabilities.

And one of the things we do is talk about vehicles. And so I remember asking somebody in the group, what's your dream car?

I think they told me it was like a G-Wagon, like a Mercedes G-Wagon.

And I was like, well, how much is a G-Wagon?

It's like, oh, brand new. It's like 150. They were so excited about it.

And I said, well, if you go buy that Mercedes for $150,000, how much is it worth when you get home?

And it was like $150,000. And I was like, so that it's not how it works?

It goes back to, the number one thing I think goes back to how it's presented.

And for two, one thing that was, as I mentioned earlier, that was very important with Cathway and come with financial literacy, especially in underserved communities, was I want to give it to you in a way and in a, on a platform in a way that not only am I giving you the information, but I'm allowing you to put the information to use at that very moment, because that's when you get the best results and the best financial behavior.

So that's how, that's my theory and what we've seen change in the way that we do financial literacy.

I really feel that.

A lot of what you're saying right now, I remember from when I was in high school, we had a required class called consumer education.

And as I, and as, you know, growing up, like after growing up and encountering other people in the real world and talking about useful things we learned in school, I, at one point I brought up, you know, what we learned in consumer ed things, including things like how to, you know, tell the difference between different types of car insurance and how to fire, file your taxes.

And they were like, wait, they taught you that in school?

There should be a, there should be a consumer ed class that's like focused for the general public.

We do. I mean, we, you know, it's things that I know for some people might seem so small, but are so big in our programs that we see a lot of, you know, quick look at our analytics and see that people really like went in on this, this section.

And it might be even like the withholding, like people get their first job and you get like your text paper and it's like, do I hit one?

Am I four? Do I do three? Like most people have no clue, like what any of that means.

And so that type of information, we're giving the information in a way and presenting it to them when we know like, Hey, this is, they're going to use this, they need this.

I think that's really big for changing even the narrative around financial literacy.

Awesome. Let's, let's, let's shine the spotlight a bit on your own personal journey while we still have some time left from your hometown to what you studied at school and then your, and then your early career.

So you grew up in Mississippi in an underbanked town, right? So let's start there.

I grew up in Terry, Mississippi. So a little small town outside of Jackson, which is the capital.

We had one bank. It was a, it was a local bank though.

It wasn't like a regional or national bank. Nobody really used that bank to be quite honest.

Most people cash their checks actually at the grocery store or the convenience store.

And I, I'm that person where like you see on the old movies where like the, the grandmother, the granddad has their money, like the sock or like the mattress or the wall.

My, my great grandmother used to keep her money in her house.

She didn't, she didn't have a bank account. And so that is why I grew up around.

I, I had an uncle and I have an uncle. I have a sister who up until Cathway completely was unbanked.

And that's just, that is, and that's why I tell people like one of my biggest advantages with Cathway is I know that the audience want a personal piece.

I know how they think. I know it's like not having access to those proper tools.

And so, yeah, that's, that's where I grew up. And when you were in college, you you hired a developer to write your first to write a whole host of applications.

Can you tell us that story? Yeah. First app I did was in college.

I had an idea for an app and I left Walmart my senior year of college. And the apps were still young.

It was 2011. And I could not code non-technical. And I was like, well, I couldn't find anybody on campus who could code it for me.

And so I googled and I found this developer on guru.com. And it was like, hey, and what I did not know, I had like, I use Microsoft word.

I had designed out the app, like using the text boxes.

Like I want to look like this. I had typed out like what I want every screen to do, which of course is pretty much a float or a space.

I did not know at the time I was doing. And yeah, he coded it for me and we worked together up my first, my second app, we worked together until I graduated.

And then my third app did really well.

And that's the app and I moved from Mississippi to Silicon Valley.

Nice. So, and then you, right, let's see. We only have about two minutes left.

So before we sign off, do you have any pop culture art recommendation for the audience?

It can be a book or a film or TV show or song or anything.

The last book that I read was a book called influence and it was really good.

It talks about why some things go viral and some, why some things don't.

And it was probably really, that's the last book that I read.

It was really good. So I would highly recommend that book.

Awesome. Thank you. Thank you so much for the recommendation and for sharing your story.

And thank you for joining us on Founder Focus.

No problem. Thank you for having me.