Off-grid ATM fees. Monthly service charges. Card Replacement Fee. Exchange fee. Transfer fees. Overdraft fees. Check the fees. Honoraria, honoraria, honoraria, honoraria, honoraria.
Oh and interest, of course.
Previously, the bank was based on a simple economic principle: put customers’ money in deposit accounts that pay interest, and then lend that money in the form of loans at a higher interest rate. Today, however, modern banking – much like the airline industry – thrives on fees added to basic services. JP Morgan Chase made about $ 77.44 billion on interest income, but $ 50 billion on non-interest income (i.e. fees), according to MarketWatch.
As pressure intensifies on banks to increase these revenues, consumers can be tricked into paying all kinds of fees that they didn’t even know they had to pay.
This is where Cushion comes in. The San Francisco-based fintech startup offers a consumer app that extracts transaction history from its users’ bank accounts, determines what charges have been assessed, and then conducts negotiations on their behalf for a refund. It is designed to be incentive-aligned with consumers by taking a commission only on returned cash.
The company has seen early success so far and (officially) announced today that it has raised $ 2.8 million in seed capital from Afore Capital, which has also invested in the pre-seed round. of the company, as well as 9Yards Capital, Flourish, Green Cow Venture Capital and Vestigo Ventures. Its initial filing on Form D said the company was aiming for $ 2.5 million, and its amended filing in February showed $ 2.8 million.
Why Cushion avoided Plaid in its early days
Founder Paul Kesserwani came up with the idea for Cushion after quitting his job at Twitter. While taking some time to think about what he wanted to do next, he helped his parents manage their bank accounts while they traveled to work in Lebanon. Due to bank security policies, her parents were unable to log into their accounts from Lebanon, and ultimately faced a mountain of bank fees as their accounts went unattended. As Kesserwani investigated, he turned to his own accounts and found that he had also paid a fee amounting to $ 400 which he had no recollection of agreeing to.
This sparked the idea for Cushion, which he formed in late 2016, and he launched an alpha product based on Plaid, the popular banking API platform. But he was quickly kicked out of the service for retaining user credentials, which violated Plaid policies. Cushion uses the credentials to trade on your behalf by accessing secure messaging systems available at many major banks. So this is an essential feature for the product to work as expected.
Kesserwani decided to bypass these restrictions by creating his own data plumbing to avoid using Plaid. âIf we build our own infrastructure, then we can offer a whole range of services that no one else can,â he explained to me. The new platform was launched in early January 2018.
With the infrastructure, Cushion can now securely download a user’s transaction history, and also automatically initiate and process reimbursement and fee reduction requests directly to banks.
Surprisingly, many banks are quite open to these negotiations. Kesserwani told me the story of a user who drove around looking for a payday loan, ended up downloading Cushion and “at dinner she had $ 500 in her pocket.” The company said more than $ 1 million in fees have been reimbursed to customers since its inception.
Build personal (active) financial management
The personal financial management space has been very popular, with market leaders like Mint and Credit Karma offering products that paint a picture of a user’s finances and encourage users to sign up for credit card offers. and other financial products as a business model.
Kesserwani sees a distinction between what these kinds of companies have done and what he wants to do with Cushion. âA lot of people focus on really sexy issues like investing, but we think there are a lot of fundamental issuesâ that no one is solving, he explained.
Rather than just offering a financial snapshot with a few recommendations, he wants Cushion to be able to actively manage a user’s financial accounts in order to maximize their financial health. This could mean switching to a cheaper bank account offer with lower fees, or hypothetically, working with a utility company to change the deadline for a heating bill so that a user does not need to pay. ‘a payday loan to pay it off in the first place.
âIf we do our job right, we introduce this whole new concept of managing your finances for you,â Kesserwani explained. He believes that the enormous complexity of the banking and financial world of consumers in the United States lends itself to more activist software intervention.
This mission is what attracted Emmalyn Shaw of Flourish Ventures, an economic resilience-focused Omidyar Network spin-off company that raised $ 300 million in new capital and also merged into an existing $ 200 million portfolio. What attracted her to Cushion was the incentive alignment between the company and its users. It only makes money when its customers are making money, unlike products that are focused on advertising. In addition, it can democratize finance by making tariff negotiations accessible to all.
Will the banks continue to negotiate?
Cushion says it has already “onboarded tens of thousands” of users on the platform. But what if millions of people use AI to contact their banks for fee reductions? Ultimately, will the banks not stop negotiating and will they only give their AI interlocutors a middle finger?
Kesserwani appreciates this prospect, but mentioned several times in our interview that banks face extremely high customer service costs when working with customers. He sees an opportunity for Cushion to potentially work directly with banks and provide them with much more affordable mechanisms to interact with their customers.
Additionally, the cost of acquiring a new bank customer is extreme, and Cushion could help direct customers to low-cost bank accounts. Without the high marketing costs required to make such programs profitable, Cushion might be able to make low-cost accounts more viable for banks.
This trajectory is however in the future. For now, the company is looking to hire more engineers and data scientists, and continues to develop its AI recommendations, in the hopes of someday turning its overbilled customers into freed customers.
Update: This article has been updated to reflect the fact that Cushion has not literally rebuilt Plaid, but has simply built its infrastructure to avoid using the popular service.