Lance, a new challenger bank for freelancers, aims to attract a significant share of the approximately 60 million gig workers in the U.S.
The fintech recently closed on $2.8 million in seed fundraising with investments from the bank Barclays, the venture capital firm Great Oaks Capital and the startup accelerator Techstars, among others, Lance said in a press release Tuesday.
Lance, whose Federal Deposit Insurance Corp. (FDIC)-insured deposits are held at Charlottesville, Virginia-based Blue Ridge Bank, uses automation to address the typical volatility of a freelancer’s income by creating a series of sub-accounts for the user.
Lance distributes a portion of a user’s income payments toward personal salary, tax withholdings, business expense balance and a savings account.
"We found that those are really the essential building blocks to running your own business effectively, and largely what is unaddressed, typically, by the banking and accounting software that exists today, because it's all more of a historical ledger of what you've already spent but not a proactive management of your funds," said Oona Rokyta, Lance's CEO and co-founder.
The New York City-based neobank’s target demographic is what Rokyta calls the "middle class of freelancers" making $50,000 to $125,000 a year.
"We found that that's where the greatest challenge exists today. Freelancers are trying to patch together their bank account, an accounting system like QuickBooks or FreshBooks, and then they still need to pull together a spreadsheet, and maybe even a simple invoicing system to keep track of everything," she said. "We found that we could actually combine those three basic needs, in a more active and automated fashion."
In addition to the free account, Lance also offers a pro version that account holders can opt into for $12 per month. The pro version pays the IRS quarterly taxes from the withholdings and pre-populates a Schedule C form.
Lance estimates its services save freelancers 100 hours per year and $7,500 in fees and deductibles.
Rokyta, who launched the startup after experiencing her own accounting hurdles as a freelance public-relations and marketing professional, said she’s encouraged by early investment from Barclays and other companies, adding the support underscores the need for niche banking products designed for the freelance economy.
"Banks I think are really aware of the need to launch into Banking 3.0. We've brought people on mobile-ly, we've started marketing to them — whether they're freelancers or teenagers or some other segment — but there needs to be an evolution in the actual products that you provide for somebody once you know their goals," she said.
As the freelance economy expands — the sector experienced an 8-fold increase in transactional volume since the beginning of the pandemic, according to a report from Upwork — a growing number of fintechs are targeting gig workers and small-business owners with tailored banking services.
Still, Lance's capital backing so far is small by recent fintech standards. Lili, a neobank for freelancers and gig-economy workers, announced last week it raised $55 million and doubled its customer base to more than 200,000 active accounts since November.
Novo, a digital bank for small businesses, recently expanded its product suite to include invoicing and budgeting, a response to a surge in new users who migrated to the platform from Azlo, ahead of that entrepreneur-focused startup's shutdown.