Fintech Dave Focuses on Product Expansion, Margin Improvement, Says CEO (NASDAQ:DAVE)

In the past month, Dave (NASDAQ: DAVE) stock has risen 32% to $0.41 by the close on Friday, but it still has a long way to go if it is to recapture the $8.27 per share level when it was cleared on January 5, 2022.

Still, business is doing well, CEO Jason Wilk said during a recent interview with Seeking Alpha. The company’s “core value proposition” is a no-hidden-fee checking account that comes with a $500 interest-free overdraft when the customer needs a little extra money between paychecks. That feature is aptly called “ExtraCash”.

Dave (DAVE) charges members a subscription fee of $1 per month. If a member wants to borrow up to $500, they can have the money transferred to their bank account for free using ACH, which takes one to three business days, or they can choose instant payment on a debit card for a small processing fee. Dave (DAVE) also asks for a tip. Customers can pay whatever they think is fair, from zero to 15% of the total extended amount.

While the ExtraCash feature of Dave (DAVE) accounts attracts new members, the use of the debit card is where the company makes its money. “We have a fantastic business model with our Dave debit card, where we want to get as many people to start using it as we monetize the interchange fees on it from Mastercard (MA),” Wilk said. “For every thousand dollars they spend on their Dave card, we make about $15.” He explains it as a fee Mastercard gives Dave (DAVE) as an incentive to conduct transactions on the card network.

“So we’re bringing in a customer to use ExtraCash and it’s driving very efficient acquisitions, and as of the third quarter of this year we’re now giving every one of our customers who joins a Dave card,” he said. And the incentive “for people to start using our card is mostly that there’s immediate access to ExtraCash and faster.” Making the card a “natural part of the product” helps move the company’s operations from credit-based income to non-credit-based income.

Wilk sees the opportunity to improve its profit margin by optimizing its pricing model and renegotiating some contracts it originally entered into when it was a smaller business. “For example, we got into our Dave card business, our contract, before we had any kind of scale. Now we have quite significant scale, so we’re redoing our negotiations with our processor as well as Mastercard (MA),” said.

The company expects to be “at least profitable during 2024,” Wilk said.

Expanding its product line will also help towards this goal. The company will introduce an extension to its Side Hustle product in the coming weeks. Side Hustle is a job search tool that helps members search and find work with companies like Uber and DoorDash. “It’s a product that people continue to carry on in any kind of economy to find extra work to afford day-to-day expenses,” Wilk said.

“Target,” another product it has rolled out, “is seeing good traction,” he said. This product helps members save for life events through recurring withdrawals from their accounts.

One thing the company doesn’t plan to do anytime soon is obtain a bank charter. Dave’s ( DAVE ) general counsel, John Ricci, came from Green Dot ( GDOT ), which has a bank charter. His recommendation was not to get involved in it, Wilk said. Until the point where deposit volume becomes large enough and interest rates reach a certain level to make it worthwhile to lend out one’s own deposits, “it’s probably not worth the effort,” he said. But “there’s a level we would cross where it would be hard not to at least consider it.”

For more from the interview, read Dave shares jump as CEO assures it has enough cash to become profitable

In October, SA contributor Leo Imasuen looked at Dave (DAVE) and its place in a crowded market of electronic checking accounts.