Inclusive fintech is hard to do right, so Line has a different direction – TechCrunch
There is no shortage fintechs claiming to build a more inclusive and mission-driven fintech platform for low-income people. However, barriers such as credit history requirements or predatory interest rates and fees prevent a whole cohort of people from engaging with our financial systems.
Akshay Krishnaiah, the founder and CEO of Line, thinks he can convince users of his vision for a more inclusive financial network. His startup distributes emergency cash lines to people — as little as $10 — without charging interest or requiring proof of credit history and income. Over time, as trust grows through reimbursement, a customer’s ability to request larger checks also increases.
To bring the customer perspective to financial services, Krishnaiah has landed millions of dollars in new funding for his startup. He tells TechCrunch that Line raised $7 million in equity funding and $18 million in debt, totaling $25 million in a round led by Massive.
Other investors participated in the round including TASC Ventures, Goodwater Capital, SustainVC, Avesta Fund, Strada Education Network, The Josephine Collective, Overtime VC, Techstars and Kelmhurst.
With new capital behind him, Krishnaiah thinks Line’s biggest disruption, and why it will work through consumer trust issues with the wider fintech world, is perspective. The entrepreneur, a former Uber driver, had the experience he is now trying to disrupt.
“The champions of product creators? They have never been in financial difficulty themselves like me or my family,” he said. “Because of that, the solutions that have been created have been more islands that are inoperable, non-inclusive and don’t talk to each other.”
Growing up in poverty, the entrepreneur detailed the years he couldn’t afford new shoes, despite his growing years, which has caused him arthritis to this day. He was nearly kicked out of the National Debating Championship because he couldn’t find a clean shirt, and he often had to choose between eating to protect his sugar levels or taking the bus to school. His parents grew up in “extreme poverty”, which also informed his view.
“People building products today, whether in Silicon Valley or elsewhere, haven’t experienced that,” Krishnaiah said. Investors often told him that his product, giving small checks for instant money, could easily be replaced if someone in need just asked a Venmo friend, he recalls. “For the same reasons, I couldn’t ask a friend to give me money so I could eat and then take the bus, it just wasn’t a reality…and people can’t resonate with that reality because they’ve never been there and never done that.”
Line, a public benefit corporation, charges a monthly subscription fee, starting at $1.97, in exchange for instant money. Once reimbursed, users can slowly scale up to larger checks and trust that could be used to underline creditworthiness.
The company, which sneaked out last July, has registered 500,000 people in more than 5,200 cities in all 50 states. The company also said sign-ups were up 100% month-over-month and the service moved from instant cash to larger checks as relationships were built.
To date, approximately 60% of Line users are women and the company’s internal team is 40% women; parity is the ultimate goal.
The startup also claims it is profitable, with revenue growing 300% quarter over quarter. This is great news for Line, especially in the context of more fintech startups, but perhaps even more significant for the clientele it serves. The business could not be financially viable if the early adopters did not repay their loans, establish trust and expand their tasks. Although Line did not provide details, it said most users return their checks within the same month and return to the same payment “line” afterwards; a revolving line of emergency funds.
“As soon as they fill their line, it’s fully available to them, so it’s not like she’s gone, they have to wait until next month,” he said.
“Instead of finding the lowest risk clients, we adjust our underwriting and technology to the client’s risk profile,” he said. The algorithm that decides who receives what funds weighs things like inflation, custodial responsibilities and hourly jobs. Of course, there are still challenges for the startup: how does it control early adopters, and what happens when the evolution and volatility of the startup are fed into recovery cycles? ? Today, technically anyone can use Line, but will the platform ultimately have to be more fussy so that only those most in need can apply for emergency funding?
The founder hopes Line’s growth can signal to the entire fintech industry that there is a better way to build for low-income people. “And we don’t want to be a neobank, just to be very clear,” he added.