Is Dave Inc. The Next Big Fintech Opportunity?

Dave Inc. (NASDAQ: DAVE) is the personal finance fintech backed by Mark Cuban that you might recognize for its friendly animated bear often used in its marketing. Its customer-centric approach -- aiming to help those who need it the most financially -- is estimated to have saved users more than $1 billion cumulatively since its inception.

What does Dave do?

Dave, in its own words, aims to "build products that level the financial playing field". What Dave really focuses on though, is overdraft fees -- a market that generated $34 billion in 2020.

Overdraft fees are costs incurred when a customer's account lacks the fund to make a transaction -- the bank will pay for the purchase on your behalf -- but consequently, you'll have to pay them back, with interest.

All three co-founding members Jason Wilk, Paras Chitrakar, and John Wolanin still make up the company's upper management, with Wilk acting as current CEO. This gives the inclination that the trio believes there's still plenty of runway to bring its service to millions of more consumers around the world.

Another admirable move is Dave's commitment to communities. Its voluntary 'Giving Back' initiative has already delivered 13 million meals in the U.S. since partnering with social enterprise Feeding America. 

Dave's financials

The company just recently went public via a special purpose acquisition company (SPAC), so information is currently limited. Dave has disclosed that it has 10 million growing members, however, achieved $40 million in total revenue in Q3 2021, and $122 million for 2020 annualized revenues. We're still in the dark when it comes to concrete growth rates and margins, but we can expect hopes of profitability to be well in the distant future for the company established just five years ago.

Dave's growth potential

While overdraft fees have been a clear pain point for consumers for years now, Dave might be in a little bit of trouble. The premise its entire business was built off of, could start to dwindle looking at changes in the industry. Many big banks are now doing a u-turn and wiping overdraft fees that have been to the dismay of customers for so long. Capital One and Ally Bank are a couple that have already clamped down on overdraft fees removing them entirely, and even Bank of America will be slashing its fees from $35 to $10, starting in May 2022.

Dave might have played a role in this change coming about, but it doesn't do a lot for its future business which was meant to disrupt this oversight.

The overdraft market isn't its only line of business, but it is typically what it's known for. Other features of its app include 'Side Hustle', an effort to tackle the gig economy, and the company says that it will use the proceeds of its capital raise to invest in cryptocurrencies and new products.

While it looks like a solid product with plenty of happy customers, Dave's a company that we'll need to see a few quarterly reports from before even thinking about delving any deeper into.