Interview with fintech startup Propel: 2023 outlook
Propel is a fintech startup based in New York that builds technology to help low-income Americans improve their financial health. Its flagship app, Providers, is a free mobile application that helps 5+ million users manage their EBT benefits, save money with tailored promotions, and earn income from job openings that fit their needs and lifestyle. For interested customers, it also offers an easy mobile bank account with its Providers Card, helping customers take control of their financial life.
We sat down with Molly Elgin-Cossart, GM of Propel Marketplace, to discuss the outlook for 2023 and what trends are top of mind for Propel and their retail partners.
One trend we hear from retailers at Bain is that the role of the store is changing. Retailers increasingly view the customer relationship as the core asset rather than the store. How do you see this trend, and how do you think this will shape retail in 2023?
This belief is core to why we’ve been successful. We have always put the trust of our customers at the heart of our business, and our goal is to better serve this customer group that often doesn’t get a lot of attention. This customer-first focus shows up in our large customer base - we have 5M+ monthly users, and the average Providers app user opens our app just about every other day. We create value by understanding deeply the needs of our users and leveraging that understanding to identify, vet, and connect our users to retailers, advertisers, and employers who offer something that provides real value to them. More and more, retailers see the importance of SNAP customers and are partnering with us because they know there is a large and growing number of cost-conscious, value-focused Americans – and I think that will continue, and even accelerate, this year heading into a period of economic uncertainty.
Your core customer segment isn’t always thought of as a big opportunity for retailers. How has Propel’s experience challenged this belief?
Many retailers don’t realize how large the SNAP market is – SNAP spending was around $110 billion in 2021. But you have to know how to serve these customers.
For example, many SNAP recipients are bargain hunting, so they shop across multiple stores to optimize what they can get for their dollars, driving down basket size. But they also value convenience and time, and they can be incredibly loyal - if they believe you have low prices in general, they’d prefer to just shop at one place. Because of this, loyalty programs tend to be very popular, and we’ve run a couple of very successful campaigns for retailers to inform people about loyalty programs. For example, we worked with a retailer to spotlight their loyalty program, driving more than 12,000 signups to their loyalty program in one month.
Services like delivery also have the opportunity to serve this segment better. Many low-income households have someone living with a disability, don’t have reliable access to transportation, or are just limiting trips because gas prices have been high, and services like free delivery can be a meaningful value proposition that can drive customer loyalty, and ultimately, outcomes like higher CLV for retailers. For example, we ran a campaign with one retailer to promote free delivery, and campaign engagement was 60% higher when it included free delivery, adoption rates were higher, and the retailers’ share of wallet increased. It led to repeat customers - even after using the free delivery promo code, people were 3 times more likely to go to that retailer’s content than they were before.
What are you doing to work with retailers as they up their digital footprint?
Many retailers don’t have a clear strategy for serving this customer segment, or they aren’t sure how to reach them profitably. We are helping them in many ways understand the opportunity and then reach this segment – because the users of its Providers app represent about a third of the total EBT budget. Not only that, but we have 8 years of serving this customer segment and deeply understand the market. We work with retailers as true partners and an important part of their digital experience, ensuring that they both reach and communicate with SNAP recipients in a respectful way. Gaining and maintaining buyer trust is always important, and with SNAP recipients perhaps even more so. It’s about pairing a smart digital strategy with the most effective channels, and meeting people where they are in a dignified way.
How have retailers’ mindsets and approaches to serving this customer segment evolved since COVID?
COVID accelerated the timeline for EBT online – essentially, allowing SNAP recipients to shop online like the rest of the country, which created an opportunity for retailers. Savvy retailers know SNAP is a big opportunity. Retailers are going after EBT online approval and starting to move into that space, and we anticipate 2023 will see a huge uptick in retailers approved for EBT online. At the same time, the demand for online grocery shopping is increasing, and we saw an increase of more than 50% in the share of online EBT transactions between 2021 and 2022.
How do you think the economic headwinds/potential recession will impact consumers and retail in 2023?
The past year has presented substantial difficulties for SNAP households. While they tend to be cost-conscious regardless of the macroeconomic conditions, the impact of inflation and the end of pandemic-era social benefits are hitting them hard. During the pandemic, the expansions of social benefits (such as child tax credit and stimulus checks) helped prevent higher levels of food insecurity and financial emergencies, but as those benefits phase out, and inflation hits, it is harder and harder for families to keep food on the table.
From a retailer perspective, SNAP tends to be countercyclical. There will likely be more people needing SNAP in the coming year, given the economic conditions, and therefore SNAP dollars can be a stable source of income for retailers.