‘We still need to earn the trust of millions of Americans who are experiencing digital banking for the first time’: Dave’s Jason Wilk

'We still need to earn the trust of millions of Americans who are experiencing digital banking for the first time': Dave's Jason Wilk

A conversation with Jason Wilk on Q2 results and how things might pan out for neobanks going forward.

by SARA KHAIRI

Source: Dave

For the second quarter ending June 30, 2023, Dave reported:

• GAAP Revenue was up 4% and 34% YoY to $61.2 million
• Net Loss was $22.6 million compared to $27.1 million in the same quarter last year
• Adjusted EBITDA came in at $13.1 million compared to $28.5 million in Q2'22
• Delinquency rate decreased YoY to2.83% from 3.67%

With a narrow set of banking and cash advance features at the center, Dave reported a $2.4 million increase in service and subscription revenue followed by a dip in transaction-based revenue. The firm expects its most recent rollout of 4% APY on Members’ Dave Card and Goals accounts will help to propel growth in engagement across the Dave ecosystem.

I spoke with Jason Wilk, CEO and founder of Dave, about his overview of the second quarter results, challenges for neobanks at large, and what's in store for the firm in the months ahead.

How did Dave manage to reduce its delinquency rates – considering an uptick in delinquencies was an industry-wide concern in the second quarter?

Jason Wilk, Dave: Even against a challenging economic backdrop, Dave keeps low delinquency rates, and we continuously lower our delinquency rates, through a deep understanding of our members and applying AI to our underwriting processes. By using iterative AI models that measure various data points, from members’ income to spending habits, we can provide more ExtraCash to our members at lower delinquency rates than traditional crediting models. 

We expect delinquency rates to remain well below 2022 levels as our AI-based underwriting model continues to evolve and improve.

How difficult has it become to acquire new members and retain them given the high competition and evolving customer preferences?

Jason Wilk, Dave: Our marketing engines are performing well, as evidenced by our Q2 results. We’ve grown Dave's members to more than 9 million. We achieved this by consistently delivering value through our core products like ExtraCash and are excited to see how other differentiated products, such as interest-bearing accounts with a 4% variable rate APY for both Dave Spending (checking) and Goals (savings), perform for our members over time. 

What are the problems faced by neobanks in today's environment?

Jason Wilk, Dave: We still need to earn the trust of millions of Americans who are experiencing digital banking for the first time, and we don’t underestimate the seriousness with which people handle their finances. It’s natural for these consumers to be concerned about their data security and privacy so it’s essential that we prioritize this in the way we build our products. 

Dave has put measures in place to enhance the security of sensitive data, using encryption, limited access models, and implementing multi-factor authentication to protect our systems from unauthorized access. These exceed the standards recommended for US financial institutions and are regularly verified by independent third-party testing of our controls.

How has the banking crisis affected neobanks at large?

Jason Wilk, Dave: While the collapse of banks like SVB benefitted larger banking institutions, historically these options do not serve our target market. These recent events have exposed the great need for more diversified banking options in the market – ones that provide more options for today’s financially struggling Americans with products that fit their specific financial needs and goals.

Market recap

The stock market survived another week of peaks and troughs

Marqeta (MQ) - up 8% to $5.70 per share

• Marqeta’s second quarter results showed total processing volume growth of 32% to $53.6 billion.
• The firm has also extended its alliance with its largest customer, Block, through 2027 for transaction services for Cash App and Afterpay.

Block (SQ) - down 10% to $56.10 per share

• Block stock has pulled back over 3% so far in 2023. Although revenue in the second quarter beat estimates, gross payment volume from merchant customers was missed.
• The growth trajectory of Cash App is also garnering attention as Cash App’s $44 million of bitcoin gross profit during the three months was down slightly from the prior quarter but up 7% YoY.

Editor's picks

Tweet of the week

Just look at the charts

1. MoneyLion makes progress toward profitability in contrast with Dave

Source: Fintech Business Weekly

2. Why Visa holds the crown in the financial industry

Source: Seeking Alpha

This week's reads

PayPal: The beginning of a new era with incoming CEO Alex Chriss

Tearsheet

Alex Chriss, who currently holds a senior position at Intuit, will fill Schulman’s shoes and take the reins of the payments firm starting September 27, 2023. Chriss will most likely encounter a variety of challenges related to growth and competition among other things while en route to a path less known to him.

Goldman Sachs boosts compliance department amid regulatory scrutiny of the industry

PYMNTS

Goldman Sachs Group is reportedly adding staff to its compliance department even as it has cut executives from other parts of its operations due to a slump in business, amid increased scrutiny of the industry from the Federal Reserve. CEO David Solomon has acknowledged the tougher regulatory climate for the industry at large. The fallout from the Archegos Capital Management scandal in 2021 has prompted a closer examination of how all Wall Street banks handle counterparty credit risks.

Regional banks slide after Fed’s Kashkari advocates ‘significantly further’ capital regulation

CNBC

Minneapolis Federal Reserve President Neel Kashkari favors getting tougher on regional banks, following a crisis earlier this year that he said may not be over. Asked during a town hall whether he agrees with proposals setting higher capital requirements for banks with more than $100 billion in assets, the central bank official said, “My own personal opinion is it doesn’t go far enough. I think it’s a step in the right direction, but I would like to go significantly further.” Regional bank shares fell as Kashkari spoke.