Managing finances for small and microbusinesses is a mess. 57 million people in the US freelance and 30 million or so of those are micro and small businesses. Small businesses use approximately a dozen apps and pieces of software to manage their finances. From a bank account to payments to QuickBooks to factoring, microbusinesses spend 365 hours a year reconciling the data between all their financial tools.
While running fintech strategy at Chase, George Kurtyka decided that he could so something about it. Together with his co-founder, they launched Joust, which is one of those few fintech products that you’re just like, wait, why isn’t there something out there already like that?
Devising a bank for freelancers and soloprenuers
When I was running digital fintech strategy for the retail bank at Chase, I recognized that there was a huge gap between a digital product offering and what the retail, business, and commercial bank could offer. Chase and JPMorgan in general have their own issues with lethargy, being a 275,000 person organization.
The addressable market was huge: 53 million people in the US freelance and 30 million of those are micro- and small businesses. The total addressable market size is something like $2.2 trillion with $80 billion in payments revenue. As the freelance workforce grew at 3x the overall US workforce, there was a great gap in what was out there in digital banking platforms to address this market.
How solopreneurs and freelances manage their finances today
Small business owners typically use something like 10 financial products today. They have a bank account and have to layer in payments (like Braintree or Stripe), QuickBooks Online, XOOM, and factoring (Fundbox). They’re spending like 365 hours a year reconciling the data when all they want to do is have the freedom of running a business for themselves.
We decided that we could do better by combining the bank account with the payment account. So, when you onboard with Joust, you get a mobile banking account with all the bells and whistles that come standard today, like goals and a debit card. You get a fully integrated merchant account, so you can send invoices from inside the account and receive and settle the payment inside your bank account. You think this would exist today, but it doesn’t.
You can walk into Chase or BBVA and oftentimes, it’s two separate people to talk to: one for the bank account and another for a merchant account.
The freelancer’s main pain points in their business
Then we looked at the pain point for our targets and what we found is that freelancers lose like 14 percent of their annual income to flaky clients with no recourse. So, we layered in something we’re calling PayArmor, which is essentially invoice factoring. Through a partnership and one API, we’re able to provide single invoice financing off of every invoice.
So, when an entrepreneur goes to send an invoice, maybe they don’t know their client so well. Our app asks them if they want to guarantee their invoice and we enable them to do that for a fee.
Building or partnering to grow a challenger banking platform
One of our partners is Q2 and Cambr, which operate on the StoneCastle network. So, with one API, we can onboard a customer with a business bank account. Right now, we’re opening FDIC-insured bank accounts with a great partner nbkc in Kansas City. They’re a very progressive bank and have been a truly great partner.
We decided that the FDIC account opening and card issuing are commodities. Our onboarding is covered. Where we really got our start is in our risk and data mining operation. For us, we need to look at our customers’ customers. We built a risk engine that we called Gestalt that connects these disparate data sources. We look at our customers’ banking data and who they are invoicing.
In the future, and this goes to the underserved market, freelancers have varying income every month and that makes it hard to offer them financial products. In the future, we can take our core risk engine and turn it into a way to enable freelancers to get loans and credit cards. We want to focus on risk, intelligence and risk and we’d rather partner on the banking piece because there are other institutions that just do that better.