Neobank Dave Makes Business Model Changes in Wake of FTC Complaint

Dave, the neobank and cash advance app singled out in an Federal Trade Commission (FTC) complaint last week, Tuesday (Nov. 12) announced compliance-oriented changes to its business model fundamentals, including a new sponsor bank.

The announcements were made in the context of the company’s mostly positive Q3 earnings. And while he struck a defiant tone at the beginning of the call, CEO Jason Wilk addressed several changes that can be traced directly to the FTC complaint, some of which hit the core tenets of Dave’s business model, part of which allows consumers to access cash advances not to exceed $500.

The FTC alleges that Dave fails to clearly and conspicuously disclose the Express Fee of $3 to $25 for instant advances, a charge referred to as a “tip,” and a $1 monthly membership fee.  Additionally, the FTC claims that Dave’s tip feature misleads consumers into believing they are making a charitable donation when, in fact, the company allegedly keeps most of the tip for itself.   

But while Extra Cash loan originations continue to drive Dave’s revenue, it is also seeing traction from the Dave Card and checking account launched in late 2021. The interplay between the two of them became important on the call, as Wilk announced it would continue “enhancing and refining” Extra Cash in 2025, but would spend more resources — including R&D —  toward Dave Card and potentially subscription tiers that would allow it to charge more for its Extra Cash privileges than the $1 per month it currently gets.

From the three revenue streams Extra Cash, Dave Card and subscriptions — resulted in a strong 14% year over year quarterly revenue increase and an 11% sequential increase in average revenue per user during the third quarter. Total Q3 revenue was up 41% year over year to $92.5 million; Q3 net income improved from a $12.1 million loss in 2023 to a $500,000 gain in 2024.

Changing Fee Structure

Wilk said he believes the company’s business model is flexible enough to continue expanding the monetization of its member base, some of which include a higher average in Extra Cash advances.

“In 2023 we successfully transitioned from a tier-based fee structure to one that is percent based, which improved our average revenue for Extra Cash disbursement and new member conversion without any adverse impact to extra cash engagement or retention,” Wilk told the earnings call audience.

“As the next step in this evolution, we are testing a simplified mandatory fee structure and user experience that will remove both optional tips and optional instant transfer fees to Dave checking accounts. After issuing over 115 million Extra Cash originations, we believe we have sufficient data to assess the willingness of what members will pay for access to the service.”

Wilk was at first defiant about the FTC complaint, saying, “We believe we have a strong defense and are prepared to vigorously defend ourselves. As a reminder, the FTC suit does not question our ability to charge subscription fees, optional tips or express fees, but rather they pertain to our consumer disclosures and how the company acquires consent for the fees associated with our products, where we believe we have always operated within the laws.”

The FTC also alleged that Dave misrepresented the available cash advances. Dave advertised instant access to cash advances of up to $500, but the FTC alleges that the company rarely offered the advertised maximum amount, with many consumers receiving significantly lower advances. The “instant” label from those advances has been removed from mentions on its website, replaced by the disclaimer “in five minutes or less.”

Bank Partnership

Finally, the bank did not identify its new sponsor bank partner, only to say that it is publicly traded. “Given the scale we’ve achieved and the strong member growth we continue to experience, earlier today we announced that we entered into a nonbinding letter of intent to form a strategic partnership with what we believe to be one of the most highly respected FinTech sponsor banks in order to further diversify our key commercial relationships,” Wilk said.

“This new bank partner, whose parent is publicly traded, will leverage its strong compliance and risk management capabilities to sponsor our current and future credit and banking products in support of Dave’s mission of leveling the financial playing field for everyday Americans.”

Speculation is rife as to who that bank will be. It will not be Evolve Bank and Trust, the Synapse connected sponsor bank that Dave currently does all its business with. In response to an analysts question, Wilk said the new banking partner will allow Dave to launch at least one new credit product in 2025.

While the changes at Dave are clearly aimed at the FTC complaint and other criticisms of its business model, Wilk said he expects a different reception in Washington from the Trump Administration.

“Well, I would expect a more business friendly environment both from the CFPB [Consumer Financial Protection Bureau] and FTC,” he said. “But we’ll see what happens as the administration turns over. But we’re feeling very confident in our position and the market seems to be in favor of that as well.”

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