Daylight raises millions to build a digital banking platform ‘designed for and by’ the LGBTQ community
Daylight raises millions to build a digital banking platform ‘designed for and by’ the LGBTQ+ community
There has been a surge in the number of newly formed digital banks targeting specific demographics over the last year. Almost always, banks are attempting to meet the needs of segments of society that they believe are being overlooked or underserved by traditional financial institutions.
The most recent neobank to emerge is New York-based Daylight, which bills itself as the country's first LGBTQ+ digital banking platform. (In Brazil, there is a digital bank called Pride Bank with a similar mission.)
LGBTQ is an acronym for lesbian, gay, bisexual, transgender and queer. These terms are used to describe a person's sexual orientation or gender. These individuals have been somewhat isolated, discriminated and deprived of many benefits straight people enjoy.
Daylight announced today that it has raised $5 million in a seed funding round led by LGBTQ+ entrepreneurs Rob Curtis (CEO), Billie Simmons, a trans woman (COO), and Paul Barnes Hoggett (CTO). The round was co-led by Kapor Capital and Precursor Capital, with participation from Anthemis Group, Clocktower, Financial Venture Studio, and Citi.
Daylight's mission statement states that it exists to "create a more equitable financial life for LGBTQ+ individuals and their chosen families." The company's services are aimed at LGBTQ+ individuals, their families, and allies — or, as Daylight puts it, "value-driven consumers who want to support the queer community."
The startup, founded in 2020, intends to use the new funding primarily to expand its flagship product and lifestyle services, which are aimed at increasing financial equality and inclusion for the estimated 30-million-plus Americans who identify as LGBTQ+. In addition, it intends to develop a marketplace for LGBTQ+ businesses and a platform that offers discounts and rewards to members who shop at merchants who support the queer community.
Curtis explained in an interview why he believes Daylight is uniquely positioned to assist the population in overcoming obstacles such as increased debt accumulation due to pre-existing conditions, lower insurance coverage, HIV management needs, and [gender] transition costs. Simultaneously, many members of the community face lower income levels as a result of "persistent workplace discrimination."
“LGBT people approach money very differently for a variety of reasons,” Curtis explained. “We spend roughly the same percentage of our income on discretionary purchases, but we are about 20% less likely to have a savings account, 20% less likely to own investments such as stocks, and 25% less likely to own a mutual fund. And we estimate that approximately 30% of our community does not have any estate planning in place.”
Likewise, Curtis believes that life is more expensive for LGBTQ+ people in general.
“It is costly to be a gay person,” he explained. “Not only do we discover that when we come out to our parents, 40% of us lose financial support for things like college and adolescence transitions. We end up with a 50% increase in college debt. Moreover, we have increased sexual health costs, and some individuals require gender affirming surgery.”
“By the time we reach our 30s, we will be told that we can have either gender affirming surgery, a home deposit, or a child,” Curtis continued. Also, having a child is generally more expensive for this population, as individuals must either adopt or use a surrogate.
Brian Dixon, a partner at Kapor Capital, believes that the fact that Daylight's founders have personally encountered difficulties in the traditional banking industry equips them to assist others in the LGBTQ+ community.
Other Surrounding Issues
Among these issues is friction surrounding the names on issued cards, which results in customers being outed as trans. In addition, Dixon believes that the population lacks access to adequate financing products for surrogacy, IVF, adoption, transition support, and mental health.
“Many neobanks do not offer a truly differentiated banking experience, which will result in a mass exodus from traditional banks,” Dixon said. “Daylight has the potential to be an outlier, particularly given their emphasis on community. Daylight's distinguishing features include a frictionless card issuance process that enables trans and non-binary customers to order a card in their preferred name, schedule sessions with expert LGBTQ+ financial coaches, seek peer-to-peer advice from their digital community, and earn rewards that are meaningful to the LGBT+ community.”
According to Curtis, Daylight will include features such as a checking account, the ability for members to receive their paychecks two days early, free ATMs, and "no hidden fees."
“I believe that early payday is critical because we know that people who purchase hormones have a high rate of credit card declines,” he explained.
Moreover, the Daylight platform provides members with personalized recommendations that alert them when they are spending money with merchants who support anti-LGBTQ+ politicians and initiatives, a practice known as "rainbow washing." Also, it will offer alternative merchants that are, according to the company, "more aligned with the community's values."
“LGBTQ+ consumers and those who support them are extremely deliberate about their spending, but it's difficult for an individual to know whether they're spending in accordance with their values or inadvertently supporting brands that engage in rainbow washing while funding politicians and projects that works against our interests,” Curtis said.
While Daylight is still in beta, it already has "thousands and thousands" of customers on its wait list, according to Curtis, who estimates that it will reach 10,000 customers by October.
Several other digital banks targeting specific demographics have raised funding in the last year, including Fair, a multilingual digital bank and financial services platform that launched to the public earlier this year after raising $20 million in 40 days. Greenwood, First Boulevard, and Cheese emerged as well.
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