Avant Launches Zero-Cost Digital Banking

Avant Acquires Zero Financial and Level to Expand Digital Banking Services

Avant, a well-funded online lender with over $600 million in equity raised, has announced the acquisition of Zero Financial and its neobank brand, Level. This strategic move aims to accelerate Avant’s ambition of establishing itself as a comprehensive digital bank accessible to a broad consumer base.

From Online Lender to Digital Bank

Established in 2012 and headquartered in Chicago, Avant initially focused on providing loans to “underserved consumers.” However, the company is now actively transitioning towards a full-fledged digital banking model through this recent acquisition.

In 2020, Avant reported a gross revenue of $265 million. The company has secured funding from prominent investors including General Atlantic and Tiger Global Management.

Strategic Timing for Expansion

According to Avant CEO James Paris, the company’s trajectory has consistently pointed towards becoming a leading digital bank for everyday Americans. He stated to TechCrunch that the accelerated shift towards digital financial services over the past year presented an opportune moment to broaden their service offerings.

The integration of Zero Financial and Level, including its banking application assets, will enable Avant to deliver a complete suite of banking and credit products via a single, entirely digital platform.

Comprehensive Financial Product Offerings

These offerings will encompass a range of services, including deposit accounts, personal loans, credit cards, and auto loans.

The financial specifics of the deal were not publicly disclosed, but it was completed using a combination of cash and stock.

Zero Financial's Background

Zero Financial, based in San Francisco, was founded in 2016 and has raised a total of $147 million in both debt and equity, as reported by Crunchbase.

In May 2019, the company secured a $20 million Series A funding round led by New Enterprise Associates (NEA).

The Launch of Level

Level was introduced to the public in February 2020. It was developed by the same team behind Zero’s “debit-style” credit card, as highlighted in a FintechFutures article.

The challenger bank was specifically designed to appeal to millennials who were seeking alternatives to traditional banking institutions.

Shared Mission and Vision

Bryce Galen, co-founder and CEO of Zero Financial, expressed that Avant shares his company’s commitment to “challenge the status quo” by providing innovative financial solutions to consumers who may have limited access to traditional financial services.

Leveraging AI for Enhanced Credit Risk Assessment

Avant currently utilizes thousands of AI-driven data points to assess credit risk. The acquisition will expand this capability by incorporating additional data, such as a customer’s cash flow, financial management habits, and bill payment history.

This expanded data set will facilitate faster and more personalized credit decisions, empowering underbanked consumers to achieve financial independence at every stage of their financial journey.

Expanding Customer Reach and Engagement

James Paris emphasized that this acquisition will foster greater customer engagement and loyalty, and extend Avant’s reach beyond its existing base of 1.5 million customers.

Like many fintech companies, Avant believes that creditworthiness should not be solely determined by a traditional credit score.

Addressing the Needs of Credit-Challenged Consumers

A significant portion of the American population has limited, poor, or no credit history. Accessing credit can be difficult and often involves higher fees for these individuals.

Therefore, Avant focuses on providing transparent and rewarding financial products tailored to these consumers.

Benefits of Level’s Digital Platform

Level’s entirely digital platform offers features such as cashback rewards on debit card transactions, a competitive annual percentage yield (APY) on deposits, early access to paychecks, and the absence of hidden fees. These benefits are particularly valuable for individuals striving for financial stability.

Avant’s Growth and Impact

Since its founding in 2012, Avant has facilitated over $7.5 billion in loans and 400,000 credit cards for more than 1.5 million consumers. The company launched its credit card in 2017 and has experienced a 170% growth in credit card users over the past two years.