Innovators’ Spotlight: Cachet Financial Solutions

RDC specialist’s busy year includes an IPO and a fast-growing prepaid platform

By Adam Perrotta, Assistant Editor, Paybefore

When Cachet Financial Solutions launched an IPO this summer, the Minneapolis-based remote deposit capture (RDC) specialist found no shortage of takers, racking up nearly $7 million in funding from the sale of 4.5 million shares. Investor interest was no doubt driven by Cachet’s financial growth—in the three months leading up to the offering, revenues were up 145 percent compared with the same period in the previous year—as well as the early success of the company’s mobile prepaid business.

For Cachet, an IPO offered several advantages over private funding. “Public financing enables us to realize an optimal valuation and provides liquidity opportunities for future financing,” says Jeffrey Mack, chairman, CEO and president, Cachet. Established in 2010, Cachet spent its formative years building out its platform and client base and ramping up its monthly transactions to provide sustainable, recurring and high margin predictable revenue, he adds. Once those preparations began to bear fruit in the form of strong revenue growth, the company saw the opportunity to appeal to the public markets, where growth and sustainable revenue streams are key to attracting investors.

“With the type of revenue growth we’ve experienced, an IPO was a perfect option for us,” Mack notes. Mack himself is no stranger to public markets, having already guided two firms to IPOs. The first, in 1993, was for an auto lender he had founded three years earlier. The second, in 2006, was for Wireless Ronin Technologies, a dynamic digital signage provider Mack led from 2003 to 2008.

RDC Roots

After leaving Ronin, Mack worked as a consultant to small businesses, including a company that provided banking technology products, such as RDC. Recognizing the potential of RDC, Mack and co-founder, Christopher Ebbert launched Cachet in 2010. From the beginning, the company focused on backing its RDC service with a strong technological infrastructure. “The user experience has to be exceptional, or you won’t succeed. You’ve got to make sure the infrastructure is in place,” Mack tells Paybefore.

That technological know-how has helped Cachet expand its RDC offerings beyond simply offering check-to-account loads, Mack notes. “RDC is the umbrella that covers everything we offer,” he says. “Three or four years ago, RDC was mostly limited to a simple check deposit function; now it’s expanded and evolved.” As an example, he points to the company’s Select Mobile Lending tool, which uses document imaging and data extraction to enable users to apply for payday loans via smartphones and tablets.

Mobile and Prepaid

RDC also is a natural partner for prepaid. The function is widely considered a promising driver of prepaid growth, because it offers prepaid cardholders a quick and convenient way to load funds, solving one of prepaid’s most nagging challenges—the reload. Recognizing the potential to leverage its RDC capability in the prepaid space, Cachet in October 2013 debuted Select Mobile Money, a white-label prepaid mobile app for existing prepaid card programs. Select Mobile Money enables prepaid program managers to offer cardholders mobile check-to-card loading, account information, bill pay and more—giving a leg up to smaller financial institutions, which might not have the resources to develop a robust mobile platform for their own prepaid card program. “Today’s prepaid customers expect the same services they would have with a traditional bank account, including an easy way to load and spend funds,” says Mack. “So, offering a mobile banking platform that lets them do these things opens up a lot of doors for smaller financial institutions to enhance their relationships with their prepaid customers.”

Since launch, the platform has generated plenty of interest among prepaid issuers and program managers. In June, Atlanta-based FirstView Financial announced it would develop a mobile banking app based on Select Mobile Money for its prepaid cardholders. The same month, Navy Federal Credit Union unveiled plans for a prepaid mobile money management tool based on the Cachet platform. And, this month, national credit union organization League Service Corp. (LSC) tapped Cachet to develop a mobile component for a pair of prepaid card programs. Cachet amped up the platform in September, adding instant deposit and account funding via Ingo Money’s check guarantee service, which gives accountholders the option to pay a fee on approved checks and, in turn, receive immediate and irreversible access to funds on all checks—even if a check is returned.

Cachet made another bold prepaid move in March, when it acquired the Paybefore Award-winning moneto mobile payment platform from DeviceFidelity Inc. In addition to moneto, which includes a companion prepaid MasterCard, Cachet also acquired DeviceFidelity’s core Visa mobile prepaid platform, which powers the Visa Buxx prepaid card.  The acquisition enables Cachet to offer financial institutions and other financial services organizations a complete prepaid card program, including mobile app, GPR card and program management.

Cachet continues to build out and expand its prepaid offerings, with the goal of enabling its clients to offer additional functionality to their prepaid cardholders, creating long-term, profitable customers. “The greater the value proposition, the more likely customers are to pay for these services, and the stronger an FI’s relationship to its customers,” Mack says.

As to the road ahead as a public company with a mobile prepaid platform, Mack says Cachet is continuing to sign new clients and explore ways to leverage the intersection of prepaid and mobile. “This market is going to evolve, and we have to make sure we’re aware of where it’s going so we can be positioned to take advantage of those changes as they happen.”