Cincinnati fintech startup Pay Theory raises $2m seed round to accelerate growth
Pay Theory, a Cincinnati-based fintech startup, and the first payment platform with the mission to break down barriers between families and their most vital service providers through simple, beautiful, and inclusive financial solutions, has closed a $2 million seed funding round led by Zeal Capital Partners, a Washington, D.C.-based venture capital firm known for its commitment to inclusive investing.
The investment, which brings Pay Theory's total funding to $2.5 million, will go toward product development and talent acquisition for roles in sales, finance, and software development and allow it to focus on growing its Family Tech SaaS vendor and service provider relationships.
Additional new investors in the seed round include SixThirty, Ohio Impact Fund, Gaingels, and Sica Ventures. Pay Theory also received follow-on investments from Double Eagle Venture Partners, LOUD Capital, and a number of their existing angel investors.
Brad Hoeweler, CEO, Pay Theory: "This is a major step forward for Pay Theory. It represents validation for our approach to inclusive finance in the business verticals where it counts most for families. Zeal, SixThirty and the rest of our investor group bring us deep experience in payments and fintech. Their leading this seed round investment exemplifies their commitment to our innovation in this fast-growing, ever-evolving space."
Nasir Qadree, Founder and Managing Partner, Zeal Capital: "Pay Theory offers a new opportunity for fintech to leverage its power to narrow the financial divide for families and communities that have been historically ignored and underserved in the financial services industry. The potential of becoming a market leader - the impact and scale of that impact - is in lockstep with Zeal's mission to spur greater economic mobility across the US by closing the financial gap for the un- and underbanked. We are excited to help propel their journey."
Pay Theory was founded on the idea of building a better payments solution for K12 schools, which is still a focus area for the Company, but in learning how to help schools they ran into this important question: What are you doing to create equitable, inclusive access for all students and their families? Roughly 30 percent of K12 public school families in the US are un- or under-banked, locked out from traditional financing systems, and left to rely on physical cash and alternative financing to make household finances work.
More than half of Americans are living paycheck to paycheck, with nearly a quarter of them un- or underbanked, creating challenges in making payments on time, particularly when bills can be lumpy, like the beginning of a school year or a surprise health situation. These challenges have only been exacerbated by COVID19, as transactions have moved online and families have lost jobs and been prevented from making payments in person.
With its cutting-edge platform, Pay Theory empowers SaaS vendors to must-pay service providers, like K12 schools, childcare providers, healthcare services, and kids sports and activity organizations to embrace and implement technology that delivers better customer experiences, while at the same time ensuring inclusivity for all families regardless of their access to a checking account or credit card.
Pay Theory does this by giving families the option to pay for an online purchase transaction in physical cash using a network of nearly 60,000 retailers nationwide - and growing - including Dollar General, CVS, 7-Eleven, Walgreens, and Walmart. A bill or fee of any sort can be issued to a family who chooses to pay in cash through one Pay Theory's partners. Once the family chooses cash, they are issued a barcode, either virtually on a smartphone or through email, that can then be scanned by a cashier at a retailer and paid for in cash. This allows service providers to be virtually cash-free while offering a financially inclusive payment option to parents.
"Fintech can be the biggest enabler of inclusive finance in the world because it is not constrained by legacy systems or relationships," says Hoeweler. "The challenge, especially for a portion of the economy, is to build financial systems that serve every single person equitably. In doing so, tech really can make the world a better place."
Pay Theory's simplified payment architecture integrates into SaaS platforms that "must-pay" service providers, like schools or doctors' offices, are already using. These platforms process payments from a parent into a service provider's account by way of a credit or debit card transaction, an electronic check, or by a barcode for cash payments.
Eric Fulkert, President and CTO, Pay Theory: "We see broader financial services applications for this unique architecture at banks and credit unions as well."
Future plans for Pay Theory include an 'Access Now, Pay Later' solution for its verticals, tailored credit issuing, and credit score building. These solutions, as well as family-specific rewards, will help SaaS platforms empower families to make the payments to the service providers that will ultimately shape their childrens' futures.