- Method Financial aims to change the way users understand and repay debt using their API.
- Instead of physically mailing a check, Method’s repayment rail allows for streamlined transactions.
- See the 11 slides this Y Combinator-backed startup used to raise $2.5 million in pre-seed funding.
When Jose Bethancourt graduated from the University of Texas at Austin in May 2019, he faced the same question that confronts over 43 million Americans: How would he repay his student loans?
The problem led Bethancourt on a nearly two-year journey that culminated in the creation of a startup aimed at making it easier for consumers to more seamlessly pay off all kinds of debt.
Initially, Bethancourt and fellow UT grad Marco del Carmen built GradJoy, an app that helped users better understand how to manage student loan repayment and other financial habits.
GradJoy was accepted into Y Combinator in the summer of 2019. But the duo quickly realized the real benefit to users would be helping them move money to make payments instead of simply offering recommendations.
“When we started GradJoy, we thought, ‘Oh, we’ll just give advice — we don’t think people are comfortable with us touching their student loans,’ and then we realized that people were saying, ‘Hey, just move the money — if you think I should pay extra, then I’ll pay extra.’ So that’s kind of the movement that we’ve seen, just, everybody’s more comfortable with fintechs doing what’s best for them,” Bethancourt told Insider.
Bethancourt and del Carmen could easily pull money from users’
checking accounts
, but sending money to repay debt proved difficult since debts do not have routing or account numbers like bank accounts. Other founders told the pair that GradJoy could do the same thing their apps did: mail paper checks.
The pair spent three months concentrated on finding a solution and working directly with lenders and technology providers like FIS, which led to the development of an application programming interface (API) that allowed the cofounders to validate debt with a lender and initiate payment
Soon after developing the API, Bethancourt and del Carmen began to field questions about other potential use cases beyond student loans, including mortgages and credit-card debt.
In May 2021, GradJoy became Method Financial, a debt repayment API that helps facilitate payments for all kinds of consumer debt. Method covers over 95% of consumer credit in the United States and works with over 3,000 financial institutions, making it easier for their customers to send money to pay off various debts.
Following the company’s beta launch in late 2021, it processed over $1 million in payments during January 2022. Method charges a flat per-transaction fee, with a revenue of $0.65 per transaction.
On Wednesday, Method announced $2.5 million in pre-seed funding, Insider can exclusively report. The funding includes the initial $150,000 in backing from Y Combinator. Other investors include Ardent Venture Partners, LiveOak Venture Partners, AngelList Quant Fund, Leonis Capital, and angel investors including Haroon Mokhtarzada, CEO and cofounder of Truebill, and Val Gui, vice president of product at Upstart.
With the funding, Bethancourt, del Carmen, and chief operating officer Mit Shah hope to grow their Austin, Texas-based team, focusing on sales, marketing, and engineering hires. Method also hopes to develop more embeddable components for developers, like a tool to help consumers decide which debt to pay off first or access their credit reports.
Here are the 11 slides Method used to raise $2.5 million.
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