How Black-owned SoLo scaled to 1 million registered users

SoLo Funds has become the first Black-owned financial services company to cross the 1 million customer account mark. It did so last month, achieving a statistically significant milestone.

Launched in 2018, SoLo, the peer-to-peer lending marketplace, has had over 1.3 million downloads to date. Additionally, 600,000 loans have been funded through the platform, with over $300 million in transaction volume.

SoLo facilitates P2P loans for consumers living on the margins of financial services, by way of its digital SoLo Wallet that launched last year. The firm’s app lets anyone with a bank account sign up and make a loan request ranging from $50 to $1,000 by linking their bank account and debit card to the wallet.

A report issued by the US Congress Joint Economic Committee (JEC) found that roughly 20% of US adults are either unbanked or underbanked. Additionally, recent research by SoLo verified that 82% of its total members live in underserved zip codes according to the US Census designation. 

Moreover, as the nation is grappling with record-high inflation, conditions continue to exacerbate for people of color, minorities, and other underserved demographics. The Federal Reserve Bank of New York came out with a new report on inflation inequality earlier this year showing that the high prices seen lately aren’t hitting everyone the same way. People of color and gig workers, for instance, often find themselves in a tight corner due to higher rates than their counterparts at the higher end of the income scale experience.

The difficulty of accessing loans is amplified for this demographic as traditional banks typically do not offer short-term loans at scale. These institutions have labor-intensive lending processes and regulations that make it unfavorable for consumers seeking this option.

In order to issue loans more quickly, SoLo has removed itself from the lending process directly – in fact, consumers borrow from each other. Borrowers asking for short-term personal loans for immediate needs can connect with individual lenders looking to support their community and gain extra income in return. Borrowers have the option to tip the lender and the SoLo Funds platform – that is how the platform makes money without charging additional fees or interest rates. 

By providing a short-term loan solution that equips its borrowers with speed, autonomy, and access to emergency funds, SoLo aims to serve this population. It also zeroes in on middle-class consumers who are trying to step up their rate of saving – by providing them the option to earn returns on the dollars they lend.

Lately, neobanks have helped underserved populations access bank accounts, while credit-focused fintechs are providing these populations with access to credit to a certain extent. But despite so many offerings and products being launched, pain points continue to exist for this population.

“Products and features are coming out but only a few are reaching scale like SoLo and Esu Esu. The financial services of conventional banks are not readily accessible to cash-poor groups of Americans – to improve credit, make ends meet, or make a return. Additionally, government regulators haven't made it easy to serve those in need,” said Rodney Williams, co-founder and president of SoLo.

On surpassing 1 million users:

Often, growth is uncomfortable – acquiring more than 1 million registered users hasn’t come easy for SoLo. The company drove its business model reinventions a couple of times to hone its financial model before hitting on the idea of providing a safety net to its lending members. For a 5% fee, the firm’s Lender Protection product secures a lender’s loan in case it's not paid back on schedule and will credit the full amount to their SoLo Wallet. 

The platform raised a $10 million Series A round in 2021. But prior to that financing, SoLo was forced to shutter as it was strapped for funds in 2019, according to Williams.

The company was reinstituted in April 2020 with improved quality and safety of its suite of products, including protection for lenders.

In addition to building and scaling its line of products, Williams attributes incorporating Lender Protection as one of the overriding drivers of SoLo’s growing users. After it instituted Lender Protection, the company experienced significant user growth, which was followed by its Series A funding round backed by Serena Williams’ venture firm, among other investors. 

“SoLo is transforming the lives of everyday Americans with democratized access to capital and returns that’s truly rooted in community,” said Serena Williams, future tennis hall of famer and managing partner at Serena Ventures. "Community Finance is working and SoLo is proof of that. We are proud to stand behind SoLo as it continues growing at an incredible pace and focuses on giving underserved groups and individuals the tools they need to thrive financially."

What makes SoLo different?

There are a number of fintechs, like Dave, that offer solutions for early pay as a short-term capital solution for underserved consumers. These solutions are effective but cater to only a fragment of Americans who are employed at sizable corporations like Walmart with regular work hours to draw down on, according to SoLo's Williams.

This is a smaller segment as opposed to the addressable market of SoLo that comprises a significant portion of middle-class Americans ranging from lower incomes to individuals living paycheck-to-paycheck, employed across small businesses with no access to such solutions. 

“Our market is most of America with over 200+ million people being underserved. We do make an effort to speak to every American regardless of ethnicity, location, work, and family style. We are an extremely inclusive organization and go-to-market solution,” added Williams.

The company has plans to integrate products and features like interest-bearing accounts, automated lending solutions, and subscription services into its platform later in the year.

Will things change for the better for Black-owned fintechs?

Despite SoLo stepping in to challenge banks on their own playing field, the firm doesn’t consider this the tricky part. It finds limited competition due to the fact that large banks don’t generally offer access to short-term capital to the underserved demographic. 

SoLo has seen a high influx of business as demand for short-term loans has widely grown due to the massive market need and lack of options amid ongoing economic stress.

However, the challenge for SoLo continues to revolve around the rough road to land funding for founders of color.​​ Racial disparity in both lending and equity is a pivotal factor behind Black entrepreneurs' struggles to secure business funding in financial services. 

Venture funding in the US overall dropped nearly a third in 2022 as inflation and interest rates jumped — from about $337 billion to less than $214 billion. Black-founded startups were hit hard in particular by this decline, data shows. 

Furthermore, statistics do not paint a hopeful picture for Black founders as they saw their share of the venture market drop from 1.5% in 2021 to 1.1% last year. 

“Inflation and industry-wide regulatory challenges disproportionately affect founders of color with limited funding and support. Launching and scaling such a company is rare and a key reason why SoLo is the first one to get to a million users,” noted Williams.