Neobank for retirees offers early access to Social Security checks
Charlie, a neobank for the 62-plus demographic, is looking to solve pain points facing retirees and soon-to-be-retirees.
The fintech, which launched in May, allows account holders to withdraw their Social Security benefits up to four weeks early. The free service is available to account holders who link their Social Security direct deposit to their Charlie deposit account, said Kevin Nazemi, the fintech’s co-founder and CEO.
Many neobanks offer customers early access to their paychecks, a feature that has become popular with those who live paycheck to paycheck. Offering retirees advanced access to their Social Security checks is simply a streamlined version of what many other fintechs are doing with earned wages, Nazemi said.
“It's a nice instrument for a company like ours. We can provide early access to a payment that's made by the United States government,” he said.
“We're not dealing with 50 payroll systems and thousands of employers. We're dealing with the Social Security Administration as the entity that needs to meet their obligation of providing that money.”
With Charlie, Nazemi’s goal is to build a platform that addresses the unique financial needs of retirees.
“The posture of existing financial services companies are all tilted toward income generators and accumulators,” said Nazemi, who has worked in the technology and healthcare sectors for over 15 years.
The average retiree has about $50,000 in liquid savings and receives $1,800 in Social Security each month, said Nazemi.
“Most financial services offerings aren’t built for them, unless they have a ton of money,” he said. “The industry could do a lot better.”
While some may argue the particular demographic Charlie is targeting may favor traditional institutions over neobanks, Nazemi said the fintech refuses to paint the segment with a broad brush, especially in light of the COVID-19 pandemic, which accelerated digital adoption.
“A growing number of people in this population are either becoming, or will soon become, tech-comfortable enough to want a solution that comes to them, that meets their needs, and is available to them 24/7 versus defaulting to going and standing in line in a box,” he said.
He said his idea for Charlie came about after a family health issue involving his father, a senior, opened his eyes to the unique healthcare, finance and housing needs facing the 62-plus demographic.
Charlie account holders receive a 3% annual percentage yield on average balances, and have access to a network of 55,000 ATMs, including retailers CVS and Walgreens, the company said. Attica, Ohio-based Sutton Bank provides the underlying banking services for the fintech.
The company worked with a group of 20 seniors who provided input on the app’s design, including font size, color contrast and interface, Nazemi said.
“If you go on our site, you'll see a tile-based interface. The idea there is that we can contextualize what we want to draw your attention to without just adding more menu items,” he said. “Contrast that to the typical bank website. For me, it kind of feels like walking into Times Square.”
Nazemi said Charlie also plans to launch a set of optional fraud tools that would notify account holders’ loved ones of any unusual patterns or charges on an account.
Additional revenue streams
Charlie’s business model is similar to most neobanks, generating revenue from interchange fees. But Nazemi said the company plans to parallel the revenue models of a typical bank over time.
Charlie plans to launch a home pension product in the future, giving customers the ability to turn a percentage of their home’s value into an annuity and a source of income, he said.
“Most of the 80% of seniors who own their homes, 100% of their home's value is set to go to their legacy, and yet they're living in an environment where over half of them live Social Security check to Social Security check. And over half of them don't feel prepared for their retirement,” he said.
The product, for example, would allow a customer to designate 90% of their home to their legacy, and sell 10% of it today, Nazemi said, adding Charlie would charge a fee to facilitate the transaction.
“It’s not as if the broader ecosystem is blind to the needs of this audience,” Nazemi said. “What you see with the bigger banks is, the way they try to serve their needs is by adding feature after feature, but it's really hard to make these features accessible amidst the 15 hundred other offerings for the 15 constituencies that the bank is serving. When you get down to the community banks, I do think that they bring the service ethos to this audience that's needed, but they're not resourced to utilize the latest technologies to bring a simple transparent solution to the table.”
Charlie has raised $7.5 million from investors, including Better Tomorrow Ventures and Expa.