By Tanaya Macheel
Tally, an automated debt-managing app, has raised $25 million in Series B funding with the goal of expanding its reach and finding new ways to alleviate consumers' financial anxiety, Cheddar has learned.
With its existing app, the San Francisco-based company aims to remove the pain of managing credit card payments by letting users link their credit cards and paying them off on their behalf. Once users qualify, Tally offers a low-rate line of credit that users pay monthly; that payment covers the minimums on each linked credit card.
“Tally is about taking the stress off of people, millennials in particular—we’re a stressed bunch," Jason Brown, CEO and co-founder of Tally, told Cheddar Tuesday. "Two thirds of people with credit card debt in this country actually have medical levels of anxiety when it comes to managing their cards. Tally takes that stress away from them.”
Unlike many conventional credit cards, the better the user’s credit score, the better annual percentage rate they get. Tally has a monthly minimum payment requirement, though users can pay more if they like. The company promises no late fees or other penalty fees ever.
Currently Tally is only available to creditworthy users (those with at least a 660 credit score). It plans to use its new funding to expand its product for a broader set of potential users. While its initial product targets credit card debt, the company thinks it can find other routine activity and habits across consumers' financial life to automate, though it hasn't specified exactly what yet. It also plans to double its employee headcount to about 100 within the next year.
The round is being led by Kleiner Perkins. Mamoon Hamid, a managing partner at the firm, will also join Tally’s board of directors.
The company declined to disclose the size of its user base to date but said that in less than a year—the app launched in October—it’s saved people millions of dollars in interest.
Tally is making its customer acquisition push at a time when millennials, a demo that's long been credit card averse, are embracing the form of payment thanks to lucrative rewards schemes like that offered with the Chase Sapphire Reserve card. Some 45 percent of millennials applied for a rewards card within the last year, according to a February study by Aite Group; 52 percent indicated they have more than one rewards card and 80 percent said their newest card is their primary one.
Millennials also appear committed to staying on top of their bills. In second quarter earnings reports this month Chase and Citi both reported increased spending on credit cards and declines in revenue, indicating that consumers are paying their credit card balances faster and keeping them lower.
At the same time, the online lending industry is growing so much, so fast that regulators may want to slow it down. In New York alone, 35 out of 48 online lenders surveyed this month by the New York State Department of Financial Services had 235,320 customers in 2017, which is 79 percent more than in 2015. Those companies lent customers $2.9 billion last year, up 42 percent from 2015.
"Tally is fundamentally different from peer-to-peer lending," Brown said. "We are the first company to build the technology that makes full debt automation possible. We have, from the ground up, built the technology and infrastructure to actually have a service that does all the work of managing debt for you.”
According to the DFS report, online lenders should be subject to state licensing and consumer protection laws and regulations, which mandate transparency in pricing, fair lending, fair debt collection practices, and consumer data protection. Currently, fintech companies can bypass state laws by partnering with an out-of-state bank. Brown said that at Tally's inception it decided against sidestepping state regulations, allowing it to be a pure lender rather than a facilitator.
"Instead of taking this shortcut, Tally chose to invest a lot of money and time upfront, which allows us to build automated solutions that would otherwise not be possible," Brown said. "This also means that we are immune to the issues other fintechs face in New York and other states."
Tally's raise brings its total funding to $40 million. Previous investors Shasta Ventures, Cowboy Ventures and Sway Ventures also participated in the round.
For full interview, click here.