Success Story February 22, 2021 at 12:45 pm

Over 30 million Americans are underbanked, this young entrepreneur is seeking to change that

Abu Mubarik February 22, 2021 at 12:45 pm

February 22, 2021 at 12:45 pm | Success Story

Sheena Allen, founder of CapWay. Photo Credit: Forbes

Blacks and other minority groups largely remain outside the banking system. This is as a result of few banks operating in Black communities compared to white majority communities. According to the Federal Deposit Insurance Corporation (FDIC), Black and Hispanic households are more likely to be unbanked or underbanked. 

In a survey published in 2015, the FDIC found that more than 15 million did not use America’s formal banking system. However, according to the Center for Financial Services Innovation, underserved people in 2016 spent $173 billion in interest and fees, according to the Financial Services Innovation.

Sheena Allen is quite familiar with this challenge in the community she grew up. She grew up in Terry, Mississippi, where many of the community members did not have bank accounts or used the formal banking process for transactions. Instead, they relied on fee heavy solutions like payday loans and check-cashing services.

In 2016, Allen noticed how the over-reliance on non-traditional banking was depriving people of interest and fees for cashing checks. In her quest to solve this challenge, she created CapWay not only to provide a solution to the unbanked and underbanked people living on paychecks but to also provide financial literacy.

She was of the conviction that you can bank people but without proper financial literacy, the problem may be only half solved.

“I know this problem from a personal point of view, from my family and friends, but I didn’t know this problem from outside of Mississippi,” Allen, who spent a year traveling around the US researching the issue, told CNN.

She designed the app in such a way that users can connect existing accounts to the app or get a pre-paid card from CapWay. According to Allen, even though the app is for everyone, it is targeted toward Millennials.

Although there are a number of fintech apps seeking to provide banking solutions to underserved communities and people who still use the non-traditional banking system, Allen said hers is quite different from what is already in the system.

“We have a B2C and B2B2C focus. Our acquisition channels and the way we look to partner is different from what you will see with most mobile banks. We also offer tools and resources that are very important for building financial health. An example would be financial literacy. I’m a firm believer that even with giving people access to banking, if you don’t educate them on how money works, there will still be a disconnect and just more opportunities for them to make mistakes with money,” she told NYC fintech women.

Allen raised $625,000 from Backstage Capital to fund her firm. Backstage Capital is founded by Arlan Hamilton, who is also a native of Mississippi. “She could be underestimated when she walks into the room–she’s a Southern belle–but she’s relatable, and knows what’s happening in the real world,” said Hamilton, according to Inc. “It’s so expensive to be poor.” 

The app is currently at the testing phase and it will be first rolled out to iOS, Android and mobile web users in Mississippi, which, according to CNN, has the highest people of unbanked and underserved residents. 

Allen hopes to officially launch the app later this year and partner with schools, employers, financial institutions and community organizations to register its targeted population. In addition, the company intends to make money through membership subscriptions, prepaid card fees and advertising and sponsored content.

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