With SPAC Deal, Fintech Firm Dave Eyes Expansion

Banking app Dave is set to go public this quarter through a merger with a special purpose acquisition company valued at $4 billion, with plans to leverage the goodwill it has built with customers by helping them avoid overdraft fees into much deeper financial relationships.

Chief Executive Jason Wilk spoke with The Wall Street Journal earlier this month about how the company, whose early backers include billionaire Mark Cuban, has built its brand by offering consumers products and services that it says big banks wouldn’t typically offer.

Last year, the company expanded its offering to include a checking account, and Mr. Wilk says the deal with VPC Impact Acquisition Holdings III Inc., sponsored by Victory Park Capital, would allow it to expand further. At the time of the deal’s announcement, Dave had 10 million users.

Tiger Global Management, Wellington Management and Corbin Capital Partners have agreed to invest $210 million as the companies merge, Victory Park and Dave said. Victory Park is an existing investor in Dave.

The following conversation has been edited for clarity and brevity.

THE WALL STREET jOURNAL: You didn’t have depository services until fairly recently. What was the thought process behind that?

WILK: We started off the business to help people avoid overdraft fees at their existing bank. Everyone knows that sinking feeling when you get that $34 charge from your bank. There were two specific reasons why I was overdrafting. One, I kept forgetting about upcoming bills and two, I was always needing an extra 50 bucks or $100. It’s always that annoying, last-minute charge that ends up costing you that $34 fee.

The goal with Dave is to help you avoid that fee and we spot you $100 before your next paycheck to help you avoid a negative balance.

We connected to your bank account, so we can see when it was going to go negative and look at your past spending to understand what bills are coming up. All automated.

So then what prompted the expansion into deposit services?

WILK: That was always the plan. It took us a little longer than we thought, but we wanted to start by solving the overdraft issue.

That was a great way to build loyalty, because there’s not a lot of differentiation in checking accounts these days, right?

And before we even launched checking, we launched our Side Hustle feature as a way for our members to make more money in the gig economy. So you can apply for work at Uber, Lyft, DoorDash, Instacart and about 25 other partners that are in our network.

Once we felt like we had really a differentiated set of products, we then saw our most requested feature by and large was people asking for Dave to launch its own deposit service.

What percentage of your users have opened a checking account with Dave?

WILK: Over 50% of people who use our overdraft product end up opening up a checking account with us.

Toward the end of this year or early next year, we are actually going to make it part of our product. Every Dave account is going to come with checking, which should allow us to get more competitive in this space.

Are people using it as their primary checking or does it tend to be a secondary account?

WILK: It’s a mix. Some are using us as a secondary account where they’re stashing away money for their groceries and gas and things like that.

And then we definitely see a significant amount of people who are putting over $1,000 of their direct deposit into their Dave account.

You rely on another bank for the back end. Do you have plans to pursue a bank charter?

WILK: Eventually it makes sense for us to have a charter. It’s not at the top of our list.

Who is the typical Dave customer?

WILK: Today, it is mostly people under 30. It’s customers who are either younger and are getting started with banking, or it is customers who are underserved and are getting taken advantage of by major banks.

We can move the needle for them with our core set of products to help them stop paying fees. Our average user pays $400 a year in fees to their bank. Those are largely overdraft fees and minimum balance fees.

How do you grow with them as they mature and become more financially stable?

WILK: That’s part of the reason for us wanting to go public and really accelerate the product roadmap, which includes savings, credit and other products. Investing is absolutely on the roadmap. We’re excited to make sure that we have what we need in place so we can grow with our customers for many, many years to come.

How did Side Hustle come about?

WILK: Early on in the company we had this mantra to do things that big banks would never do. One of those things was how to actually put more money in people’s pockets. Why can’t your bank show you relevant opportunities to make more money?

From our data, we saw that quite a few customers were driving for Uber or Lyft on the side, yet there has been this explosion of the gig economy — food delivery, rideshare, surveys, online tutoring, dog walking. There was no central resource to go find all these opportunities. So, Side Hustle was born.

There are plenty of features that started at fintechs like Dave that are now being offered by big banks. How do you make sure you stay relevant and differentiated as big banks adopt your bread-and-butter products?

WILK: We have to offer more. Everybody can offer a basic banking service, so it is more of a “What have you done for me lately?”

There is a lot of room for innovation around helping people get what they need.

Write to Robert Barba at [email protected]