A $ 100 cash advance free? Consumer lender Oportun is giving the idea a try
Banks routinely charge $ 30 from customers who overdraw their accounts. Now a Silicon Valley company is planning to offer a free service to stave off those high fees.
U.S. consumers who link their bank accounts to Oportun will receive SMS notifications when their balance drops below $ 100, as well as the option to receive a cash advance of up to $ 100. The money is paid back interest-free as soon as the account is replenished.
“It’s a safety net for your checking account,” said Raul Vazquez, chief executive of Oportun, during a launch of the product in San Francisco this week.
In contrast to many fintechs from the Bay Area, the privately owned company operates a multi-state network of more than 270 stores. Since its inception in 2005, the company has loaned more than $ 5 billion to more than 1.1 million customers.
Vazquez said in an interview that the new product will be available to a limited number of consumers in May and generally in the second half of the year.
He admitted that the offer was an experiment. “We want to bring a simple, easy-to-use product to market and then learn as much as possible,” he said.
A big question is whether Oportun can offset the cost of providing a free cash advance. The San Carlos, Calif. Company hopes some of the users of the product will take out an oportun loan at some point.
Vazquez said he was not concerned about exploiting the existing demand for Oportun’s credit. The $ 300 to $ 8,000 loan is often used to pay for unexpectedly high expenses or planned purchases.
While a $ 100 cash advance might not be enough to cover a car repair, it could help bridge a misalignment in the timing of a paycheck and monthly bill due date.
“They focus on solving very different use cases,” said Vazquez. “It’s not a zero-sum game.”
The product will be available to adults in the United States who have checking accounts with deposits of $ 1,000 or more for three months.
Oportun is one of numerous companies that are looking for Solve discrepancies in consumer cash flow – an awkward position that can lead to repeated overdraft fees or expensive payday loans. Others trying to address the problem are FlexWage, Earnin, and Even.