As part of a continuing series, we reached out to some innovative thinkers and organisations on the forefront of serving the unbanked, the underbanked, and others, estimated at 150 million people, who have either been consciously excluded or experienced barriers to entering the traditional banking system in the United States.

One company trying to help address this challenge is StellarFi. The company lines up against a key aim of helping the underbanked gain a ‘piece of the financial pie’ with its focus on educating Americans on the importance of building a positive credit profile. This includes sharing best practices on learning and implementing strategies to achieve an actionable personal credit score and build an excellent credit history.

Stellar solutions offer help, and hope for the underbanked

Lamine Zarrad, founder and CEO of StellarFi, can relate to the challenge of being an outsider, on many levels. He and his family immigrated to the US from a part of the collapsing USSR, escaping ethnic genocide in what’s now Azerbaijan and escaping as refugees across seven countries to freedom. But that was only the beginning of another challenge: to participate in America’s banking system.

Zarrad found that without clear understanding of how ‘things’ worked in the country’s financial network, he couldn’t open accounts, build credit, or do almost anything on the banking front. The door to opportunity was effectively closed. And though these barriers started to come down for him after joining the Marines, working on Wall Street – and main street - as a banker, and attaining further education, even becoming a federal bank examiner and building several new companies in the financial arena from scratch, he never forgot the feeling of being excluded. And how important inclusion is to feeling ‘whole’ in our modern society.

Now Zarrad and his growing team at Austin, Texas-based StellarFi offer some of that help he had trouble finding himself - a ‘way in’ to the financial world for the underbanked, via a unique approach to building credit for those who might feel – or actually be – effectively shut out of the system. They may have paid on time every month for a variety of life’s needs, like phone service, streaming channels, utilities, rent, and yes, for other bills as well. But they are or were still viewed as outsiders by traditional finance, if they were noticed at all.

StellarFi, which Zarrad and his co-founding partners (including veteran journalist and entrepreneur Stacey Tisdale and multimedia personality/entrepreneur and financial empowerment advocate Angela Yee), started as a public benefit corporation in late 2021, operates kind of like a family office handling banking chores for wealthy individuals and trusts. Except the clients [members] it pays bills for might only dream of savings and wealth of any size when they start the program. But by using the StellarFi platform and having their bills registered and paid automatically every month for a very small fee, they also get those on-time payments reported to the three national credit bureaus – Equifax, Experian, and TransUnion. So, not only do StellarFi users save lots of money vs. payday lenders and check cashing alternatives they once thought were their only banking options, they also begin to immediately and demonstrably raise their credit scores along with the likelihood that they will qualify over time for competitively priced credit products…maybe even a mortgage to buy a home.

We asked Zarrad how business was going and to talk about the latest trends in the marketplace, and for StellarFi’s customers. Now, just a year since official unveiling of the company’s site and programmes (to a waiting list at the time of 40,000), he replied: “It's been absolutely phenomenal when it comes to growth and adoption.” He also emphasised the dual mission of the firm. “We’re for profit, right? And the way the product is structured is that if we make money, our customers benefit…as our clients can raise their credit scores too, by the number of bills paid on our platform.”

StellarFi’s investors helped them complete a successful Series A funding round of $15 million in late March, after ponying up $7 million last June to help it get established.

Zarrad points to the company’s quick rise in usage as one validation of its approach. “We crossed $2 million in revenue only seven months after launching,” pointing out that contrary to what the company initially expected in terms of its customer demographic, “we've been onboarding customers of all walks of life. It's another really interesting development…we thought that our early adopters [would be] young, urban, with most of our customers residing in southern metropolitan areas. Below $60,000 in annual income, and underbanked, so limited options (available to them.) That’s our ‘evangelist’, the customer who gets the most value from our products.”

But StellarFi discovered a trend - surprising to themselves as much as anyone: their offering had a strong attraction for another demographic. “The virality of this referral mechanism that we have in the [newly released] app brought on a whole new customer group [that] is mostly female, married with children, employed and at $60,000 or higher in income on average.” Zarrad explained the members of this evolving client base tend to be “underemployed, still living paycheck to paycheck, managing household finances, and using various different apps to optimise savings.”

Reflecting back on the company’s core mission to help people build access to credit and more affordable financial options, Zarrad noted StellarFi’s base and mid-level pricing ($4.99 to $9.99 per month) deliver this opportunity more affordably and actively than any other options available. Both price points offer automated bill payment for members, though the 'Prime' tier has higher bill value limits, access to credit counseling (through a partnership with National Foundation for Credit Counseling), and a member rewards programme for building better credit.

StellarFi’s CEO is passionate about why the service they offer is so important, especially right now: “Our vision is to connect customers to capital…over 60% of adults in the United States have bad credit scores, which includes 48% of high-income earners…folks who make over $150,000 a year and live paycheck to paycheck. I'm not an economist, but we can probably safely assume that being over-leveraged is part of the American dream and experience.”

Asserting that he wasn’t making a judgment whether this was right or wrong, Zarrad continued: “A lot of people take someone else's money and don't make more money – and just get themselves in a hole [and/or] buy something that loses value. It’s a systemic problem…that really needs to be addressed with policy, but there's room for technology to plug some holes, and that's kind of what we're doing. We're not, you know, naive enough to think that we could fix it all. We certainly think that we can help in some cases.”

What’s next for StellarFi? Lots more partnerships planned with various providers of financial services and solutions, Zarrad says. Some are nonprofit organisations, and some are for profit, and some are traditional finance providers. Coming soon: a top tier of membership offering additional services and flexibility to clients.

Interestingly, this “temporary solution” to help members build credit does have points of risk, because StellarFi pays bills based on a promise that the money to do so is available in member accounts. But it’s really more about trust, Zarrad insists, as StellarFi management has found that the vast majority of their members are honest and using their platform for the right reasons. In truth, StellarFi’s service does involve monitoring bank balances in advance of payments to ensure availability. But if an occasional lapse occurs, the company tries to work with their members, generally eschewing threats, fines, and fees in favour of being patient and considerate while working with them to fix the problem.

Indeed, Zarrad and his firm are keeping their moral compasses intact, even as the popularity, usage, and profitability of their website (and growing mobile app) increase steadily in StellarFi’s second year of operation. “How do you get someone money when they need it?” he asks, “especially if they don't have the right quote unquote, ‘profile’ to borrow money? The purpose here is to condition someone to be a good borrower. And that's what we do.”