Another day, another entrant to the public markets by a challenger bank, made possible by a special-purpose acquisition company (SPAC) merger. On Monday (June 7), challenger bank startup Dave’s public debut was made possible via a partnership with VPC Impact Acquisition Holdings III (VPCC), sponsored by Victory Park Capital (VPC). Dave entered the public market with an expected equity value of about $4 billion.
Dave enters the market with past backing from Norwest, Section 32, Capital One, Mark Cuban Companies, The Kraft Group and others. Launched in 2017, Dave is a financial services platform with a base of 10 million customers, designed to provide users with the opportunity to build credit and find side gigs to bolster their earnings. The bank estimates that it has helped customers sidestep close to $1 billion in overdraft fees through its ExtraCash solution and helped its users earn more than $200 million via its gig economy job board, Side Hustle.
“At Dave, we’re committed to improving the financial health of our members,” Jason Wilk, co-founder and CEO of Dave, said in a press release on Monday (June 7). “We believe the legacy financial system has failed to deliver, and today, more than 150 million people need our help to build financial stability.”
The New Financial Services Market
Dave’s announcement comes about a month after it cracked the top five in PYMNTS’ Provider Ranking of Digital Banking Apps, and it’s the latest in a series of alternative banking players entering the public markets in recent weeks. Consumer savings app Acorns announced its entrance to the public markets via SPAC in May’s opening days, while SoFi announced its official public debut last week via a merger with SPAC Social Capital Hedosophia Holdings V.
These actions were propelled by what recently released PYMNTS data identified as something of a generational shift among younger consumers’ preferences for managing their financial lives. Generation Z and younger millennial consumers are easily overlooked, the reports noted, because they collectively hold only a small fraction of the world’s wealth now — but that is going to change, and perhaps sooner than many suspect. Millennials and Gen Z consumers are expected to account for $30 trillion in wealth over the coming decade — and their preferences are running to the decidedly digital.
And, according to the report, those consumers are likely to be dissatisfied with the experience currently offered to them, with some 78 percent of millennials ad 83 percent of Gen Z consumers reporting being frustrated with bank processes. That compares with 69 percent of Gen Xers and 57 percent of baby boomers reporting similar feelings of dissatisfaction.
Creating the Experience
Younger bank customers tend to value user experience when it comes to online banking, with some surveys finding that it ranks second behind low fees as their top priority, and some 38 percent of all digital bank users rank their user experience as the most critical factor when selecting a financial institution (FI).
And over time, that growing demand, according to the report, will become the determining factor of where younger consumers — and that $30 trillion opportunity they represent — will seek their financial services going forward.
“Gen Z bank customers use digital wallets, for example, and more than 75 percent of Gen Z adults use other digital payment apps,” noted PYMNTS’ recent onboarding report. “Younger bank customers are extremely likely to switch FIs if they are unsatisfied, exacting massive opportunity costs if their needs go unmet.”
As for where FIs can start with reaching out to the next generation of digital banking customers: The study data indicates that they should start at the very beginning with the onboarding process, which today remains a slow and stodgy area of mainstream financial services. Opening a new financial account can take anywhere from 24 to 120 clicks, and can entail a 36-day wait before a consumer enjoys full access to their new account. The process of opening an Apple Card or a PayPal account, by contrast, can happen in a few minutes, and is fully operational immediately upon completing sign-on.
As recent reports and data indicate, the next generation of banking customers are simply looking for more from their financial experiences. That includes more ancillary services — like access to gig work, or insight into managing their savings over time — and more in terms of speed of access and ease of availability.
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