Debt is daunting—its labyrinth of complex rules, opaque governing bodies, and unique vernacular makes it difficult for the average consumer to understand. Concepts like credit scores, APRs, retroactive interest, and collateral can be overwhelming for financial services experts, let alone the traditional credit card holder. And yet, the average American carries four credit cards, and outstanding credit card balances in the U.S. are currently hovering around $1 trillion. (While not all spending on credit cards is “debt,” it can result in debt, should the cardholder fail to repay their balance on time.) Add in mortgages, auto loans, personal loans, and the like to a typical consumer’s financial picture, and you’re looking at an overwhelming number of open lines of credit across multiple providers with multiple payback schedules.
For all these reasons and more, what consumers do know and agree upon about debt is that once they have it, they’re probably thinking about how to get out of it. Or, at a minimum, how to find a provider that may give them some price relief on their monthly interest payments. Similarly, providers of debt—banks, credit card companies, and non-bank lenders—are also constantly on a search, but what they seek is new customers. With credit underwriting serving as a core competency for many of these firms, they are particularly focused on finding “mispriced” debt holders, that is, those customers paying higher interest rates than their creditworthiness would suggest they should. That way, they can offer more competitive rates and win over said customers’ business.
Enter Method, an embedded, debt-focused API disrupting the $4 trillion bill pay market, an astonishing portion of which still moves via paper checks. Through partnerships with consumer fintech companies (e.g., personal financial management platforms, neobanks, online lenders), banks, credit bureaus, and credit unions, Method allows consumers to link all their outstanding liabilities accounts using just a phone number and subsequently enables its customers (the businesses mentioned above) to make real-time payments to more than 15,000 financial institutions.
Many of the most popular types of debt offerings are for debt consolidation products (like balance transfer credit cards or personal loans), in which the new lender pays off a consumer’s existing debts and rolls them into one new loan at a lower interest rate. The repayment component of this equation has historically been slow, manual, and error-prone. Lenders are frequently mailing paper checks to pay off old balances, which takes days if not weeks to fully settle once you account for shipping time.
Jose and Marco felt this pain point acutely at GradJoy, their first foray into trying to solve consumer debt pain points. GradJoy was a student loan repayment optimization engine, and while the offering deeply resonated with the consumers it was helping, the user experience was often full of friction. Aggregating liabilities took users’ time, and repaying them was varying degrees of painful depending upon the financial institution holding the original loan. Jose and Marco found themselves spending a disproportionate amount of their time building out the infrastructure (rather than consumer-facing) part of their stack, and realized that effort in itself could allow them to have the most consumer impact at scale by embedding their functionality into other lenders. So they teamed up with Mit, a Wharton MBA with deep startup operating experience, to start building Method in earnest. Today, Method works with dozens of business customers of all shapes and sizes to make onboarding and repaying consumer debt accounts as seamless as possible.
We’re thrilled to announce we’re leading Method’s Series A and that I’ll be joining the board. We believe Method will serve as a foundational piece of infrastructure for the future of how consumers and lenders manage and repay outstanding debts. If you find yourself going through a particularly magical onboarding experience of syncing up all your debt accounts with just your phone number, you’ll know Method is working on your behalf behind the scenes. For lenders interested in working with Method, you can learn more on their website.
The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the current or enduring accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; a16z has not reviewed such advertisements and does not endorse any advertising content contained therein.
This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets) is available at https://a16z.com/investments/.
Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.