The upstart: Propel
Over the past 10 years Propel, a financial services provider aimed at low-income individuals, has transformed the way people access SNAP benefits, commonly referred to as food stamps.
The company’s no-frills mobile app eliminates the time-consuming task of calling a 1-800 number to check an EBT balance and provides resources to help people save money. And the results speak for itself. More than 5 million of the nation’s 21.6 million eligible households use Propel’s app, and the company has raised $68.2 million from investors.
But this year, founder and CEO Jimmy Chen has his sights on profitability as Propel improves its latest features, including fee-free online banking, tax filing services and a job board tailored to low-income workers.
This is the year that Propel will do “break-even or better,” says Chen, a former Facebook product manager who launched the company in 2014 with a $10,000 Kickstarter campaign. “That’s one of the opportunities that we think we have in 2024 — to get to that point of true financial sustainability.”
It’s a lofty goal given the nature of the business. Propel, which is a not a government contractor, makes money by collecting a portion of the interchange fees retailers pay on debit card transactions. It also makes money by selling ads on the app.
Based in Downtown Brooklyn, the company employs 98 and has partnered with roughly 100 consumer brands who advertise services such as affordable home internet.
Hans Morris, a managing partner at venture capital firm Nyca Partners, said he was initially skeptical that a for-profit financial services company could profitably serve low-income Americans. “Historically, many companies that cater to poor people were, particularly in financial services, not in the interests of those people,” he says, citing poor service, usurious rates and high fees. But Propel, according to Morris, backs its good intentions with innovative technology that reduces operating expenses, and a deep understanding of its users needs. “People really love the app,” he says.
The reigning Goliath: Capital One
The McLean, Virginia-based bank, which focuses largely on consumer services, serves more than 100 million customers, “But it still does not offer products that are really tailored to the needs of low-income Americans,” says Chen. Its 2023 revenues topped $36.8 billion.
How to slay the giant
Chen says his company spent the last two years focused on expanding its product offering rather than acquiring new customers, and the size of its user base has remained flat as a result. The goal—to create a service that’s so useful, all of the nation’s 40 million EBT cardholders will adopt it.
Propel launched its banking function—which includes checking, ATM and debit card services—in 2022, “and it’s become a core part of the app,” says Chen.
The next goal—convince users to make it their primary bank. Higher debit card spending means more interchange revenue for Propel.
Toward that end, Propel launched a tax service last year that allows users to file tax returns within the app using a tool similar to TurboTax but tailored to low-income taxpayers. Folks who receive an earned income tax credit can have the lump sum deposited directly in their Propel bank account.
Another new feature predicts the date and time users will receive the electronic deposit of their government disability check. This information is crucial for individuals who time all their payments — from groceries and utilities to the rent — around this deposit. “There’s a lot riding on it,” says Chen. “When they know when they’ll be funded, there’s a lot less stress.”
Propel still acquires users largely by word of mouth, he says, but it has done some advertising. Digital ads, primarily through Apple and Google’s app stores, have proven most effective, says Chen.
“I don’t think we’re running a Superbowl ad anytime soon,” says Chen.
On the revenue side, Propel has focused on companies that offer deals exclusively to EBT card holders. Scooter company Lime, for instance, advertised its Lime Access program on Propel, which offers free rides to low-income New Yorkers. Walmart and Amazon offer 50% off their Walmart Plus and Amazon Prime programs, respectively, to SNAP users. “We can package them up and present them to our users in a way that does not feel stigmatizing,” says Chen of these discount offers.
It took a while for Propel to develop these advertising partnerships, says Morris, the investor. “A lot of those partners didn’t believe that this was going to be a very useful use of their marketing dollars.”
But the sales cycle has sped up, he says, now that the company has proven results to share with potential advertisers.
The company would not share revenue figures.
The app’s job listings, which also generate revenue, were recently reformatted so that the gig’s hourly wages are more prominently displayed. “Most job boards you have to click in and hunt it down,” says Chen. “But our users care a lot about that. They want to know!”
The next challenge
Consumer-focused companies find it challenging to research low-income households, but Propel has the connections, says Chen: “Our users love to take surveys.” He envisions partnering with market research firm to provide paid survey opportunities to low-income consumers, “who are really unrepresented when it comes to market research.
New features to help users choose and use Medicaid and Medicare plans are also in the works.”We know it’s a big pain point, and a big opportunity for us to build something,” says Chen.
Anne Kadet is the creator of Café Anne, a weekly newsletter with a New York City focus.
Know a New York startup you would like to see featured in a future column? Write to [email protected].
Anne Kadet , 2024-03-22 11:03:04
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