StellarFi announcement Wednesday he partners with the National Foundation for Credit Counseling (NFCC). The NFCC is a non-profit organization specializing in advising consumers on all aspects of credit. The new partnership gives StellarFi users access to NFCC-certified credit counselors to help them learn more about credit and improve their financial literacy.
“We are passionate about helping people overcome financial barriers through education in financially responsible behavior,” Bruce McClary, NFCC’s senior vice president of communications, said in the press release. “We are excited to partner with StellarFi to reach more Americans who may be struggling financially, help them resolve these issues, and ensure they can live their best life.”
The new partnership is the next step in StellarFi’s goal of making credit and financial literacy more easily accessible to the general public. At launch, users will be able to follow a link in the StellarFi app to schedule an appointment with an NFCC advisor. However, according to Stellar, everything will be handled in the app in 2023.
“We believe that human contact is still critically important to keep people up to date in terms of paying bills on time, understanding budgeting, and more,” said Lamine Zarrad, CEO and Founder from Stellar. ZDNet. “You can’t solve it with an app, you have to have a human providing contextual and nuanced advice. And that’s why we decided to partner with the NFCC and we will continue to expand our partnerships with organizations that have a mission aligned with ours: fostering access to credit, improving people’s financial lives.”
What is StellarFi?
StellarFi, the company’s app, which is currently in beta, is a tool that will pay consumers’ bills for them and report positive payment activity to the three major credit bureaus (Equifax, TransUnion and Experian). By doing so, the company will help consumers build their credit simply by making payments on time and eliminating the possibility of missing one.
StellarFi does not require any credit check to register. Instead, users must register using their social security number and a valid bank account.
StellarFi will analyze a user’s bill payments, create an account, and then issue a payment on behalf of the consumer. Once payment is made, Stellar will deduct the amount from the consumer’s linked bank account. Stellar checks the balance beforehand, so as long as the funds are there, consumers won’t miss any of their bill payments.
StellarFi requires a monthly subscription and has three membership tiers that offer varying degrees of functionality. There’s the basic tier, which costs $4.99, the mid-tier, which costs $9.99, and the highest tier, which costs $19.99 per month. The $9.99 tier gives consumers the ability to add an unlimited number of bill payments to cover.
According to the company, there are no additional charges apart from the monthly subscription payment. The company’s website currently offers consumers a free trial of the service and the option to join the waitlist. StellarFi is currently set to release later in June.
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Since the business pays the bills on behalf of the consumer and then withdraws the funds after the fact from the consumer’s bank account, the business bears the risk. StellarFi is then able to report the payment to the credit bureaus as a positive payment, which strengthens the consumer’s credit.
According to Zarrad, the difficulty of access to credit products and capital for consumers is one of the flaws in the financial system that the company is trying to solve. “You have to have a great credit history. You have to have a certain profile that makes you attractive to a lender that reduces your risk, and therefore it’s really inefficient,” he said.
By providing consumers with a way to build credit to make the payments they are already making, Stellar seeks to disrupt the cycle of poverty in which some consumers find themselves living paycheck to paycheck. And not only can consumers ask Stellar to pay their utility bills, but also their rent payments, whether to an individual or a property management company. Stellar will even pay the subscription cost of any service a user subscribes to, such as Netflix, and then report that payment to the credit bureaus to help build consumer credit.
End of cycle
Stellar plans to help build the profile of its customers so they can get more favorable terms for financial products as well as faster access to capital when they need it.
“It’s not that we’re rethinking how to underwrite someone, rethinking how credit scores work, we’re not naive enough to think we’re smarter than the industry or that we have access to a magical set of attributes that no one else does,” Zarrad said.
“It’s just that no one is providing a fitness experience to users. We have personal fitness trainers, nutritionists, and dietitians. There are industries out there that help people improve their health, but when it comes to financial health, the best thing there is is a budgeting app,” he said.
By automating necessary payments for customers, thereby eliminating the risk of missing a payment, which negatively impacts their credit score, Stellar hopes to break people out of the pay-to-pay cycle that many consumers face.
“That’s basically what we wanted to do. To have an automated way to onboard you, connect to your financial life, and understand what’s going on in your bank account and [see] what kind of bills you pay, then do something meaningful for you. Not telling you what to do, but rather paying your bills. Give you access to capital. And if we could pay your bills, we could potentially break your paycheck to paycheck lifecycle and the cycle of poverty for some people,” Zarrad said.
At launch, StellarFi will include the bill payment tool, but the company plans to expand the functionality of the app later. A credit marketplace where consumers can access offers below market rates is also in the works.
Moreover, sometime after the launch of StellarFi, the company plans to take on even more risk on behalf of its customers. Stellar plans to allow certain customers to delay withdrawing their funds from their bank account for 45-60 days if they are unable to cover the bill payment immediately.
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The company is also looking to further support financial literacy. Stellar plans to gamify financial literacy resources to attract users. This means users can play financial literacy-themed games and earn badges or rewards that can then be applied to paying their bills to keep costs down. Stellar also plans to work with K-12 schools and colleges to support financial literacy for students and younger generations.
StellarFi is expected to launch later this month, but interested consumers can join the waitlist now. StellarFi website.