During the 2008 financial crisis, personal finance websites Credit Karma, Credit Sesame and NerdWallet popped up to help consumers navigate their credit and finances. These personal finance services were free, aimed to unlock a treasure trove of insights for consumers previously accessible only through financial advisors and the traditional banking industry.

Credit Sesame's next foray is in the launch of a free, digital banking service — Sesame Cash — to directly compete with large banks as well as digital banks.

"We wanted to offer a service that’s not just another digital bank, but takes it to the next level with a financial platform that helps and works for the consumer and makes their cash work for their credit and their credit work for their cash," Credit Sesame CEO Adrian Nazari told Banking Dive.

While fintechs such as Credit Karma and NerdWallet offer consumers recommendations for financial products based on credit score, Credit Sesame goes a step further by analyzing cash flow, bills, and every factor contributing to a consumer’s credit score before giving financial advice or making a highly personalized product recommendation.

Rewarding good behavior

"We want to encourage consumers to take action to care about their credit," Nazari said. "We want to reward good behavior. Thousands of consumers improved their score by 100 points in one month last quarter."

Nazari said Credit Sesame has almost 16 million users and adds around half a million users on a monthly basis.

"Sixty-two percent of our users have said they’re interested in our new differentiated digital banking service," Nazari said. "That’s huge. So, we expect our new consumer acquisition rate to increase and could make Credit Sesame the fastest growing challenger bank with huge differentiation."

"Offering a free, no-fee digital banking service is actually going to help a lot of our users," he said. "We can’t help with their income but we can help with their expenses. This is an attempt to give a consumer more access and more financial inclusion. We want to get people who are typically not part of the financial system. We want to make it free and accessible. The fact that it’s on a platform that seamlessly integrates with their credit, [Credit Sesame and Sesame Cash] help[s] consumers in a way that it didn’t before."

Ultimately, Nazari hopes Credit Sesame’s unique approach to consumer finance — by marrying personal finance advice to digital banking — will make Credit Sesame a more valuable business partner to consumer lenders.

"We’re going to be able to use more data to guide consumers to make better decisions but also these financial institutions are going to get more qualified customers so they default less and don’t fall behind," he said. "[We want to be] a business partner who is not only giving [lenders] good customers but helping customers stay on top of their cash and credit."

Fintechs pivot

Credit Sesame’s foray into digital banking is in line with the latest trends in the fintech industry. Not only are more fintechs diving into consumer finance offerings and also bundling multiple financial services for consumers, but investors are noticing the trend.

A recent CB Insights report on fintech highlighted how venture capital-backed deals for other types of fintechs fell in the 2019 fourth quarter, as "consumer startups pivoted to banking."

Intuit’s plan to buy Credit Karma, for example, shows how valuable personal finance and consumer finance-focused fintechs are becoming.

Launching Sesame Cash now could provide Credit Sesame with competitive edge over other digital banking services. Per the press release, Credit Sesame is partnering with Community Federal Savings Bank, Member FDIC, for users to open digital bank accounts.

"Over the course of 10 years by applying tech, AI and machine learning, we have gone deeper than anyone in the industry," Nazari said. "Thousands of our customers improved their score by 100 points in one month last quarter. No one else is really focusing on credit health for consumers."