NEW YORK — Split Pay, a lending startup that allows consumers to divide large monthly expenses such as rent and mortgage payments across pay periods, has raised $125 million in Series A and Series B funding as it looks to use artificial intelligence to expand its underwriting.
Khosla Ventures led both funding rounds, with participation from Thrive Capital and PayPal co-founder Max Levchin, according to Axios.
Split Pay initially focused on renters but has expanded its service to mortgage payments and other large expenses, including student loans and auto payments.
The company’s model is designed to address a common cash-flow mismatch: Consumers often receive paychecks twice a month while major expenses such as rent or mortgage payments are due in a single monthly payment.
Split Pay pays the consumer’s full bill when it is due and allows the borrower to defer as much as 50% of that amount for up to 30 days, Axios reported.
2% Fee Plus Subscription
Consumers pay a fee equal to 2% of the entire bill, along with a $10 monthly subscription charge. Split Pay does not charge interest or late fees.
Consumers who ultimately fail to repay the amount advanced lose access to the service, according to Axios.
Split Pay said it has approximately 1 million members, with about one-quarter of them using the service each month.
The company also plans to launch a Visa credit card with what it describes as a low annual percentage rate and no rewards program.
Split Pay’s approach resembles elements of the buy now, pay later model, but applies the concept to large recurring bills rather than primarily retail purchases.
The company is also betting that AI can allow it to broaden underwriting without producing a corresponding increase in credit losses.
AI Model Targets Younger Consumers
Co-founder and CEO Andrew Borovsky, a former Block and Cash App executive, told Axios the company spent its first two years developing an AI-based underwriting model focused on consumers younger than 40.
“We believe that AI is going to blow up underwriting, so we spent our first two years like a lab building a new foundation model focused on people under 40,” Borovsky told Axios.
The company said its analysis found its average customer earned about $90,000 annually and generated approximately $2,100 in cash flow but was still struggling financially and living paycheck to paycheck.
“The biggest reason was the timing of bills,” Borovsky said.
The model effectively seeks to make household cash flow operate more like the business economy, where invoices and payment terms can provide greater flexibility between when an expense is incurred and when it must be paid.
Funding Follows 2023 Seed Round
Split Pay initially raised $15 million in seed funding in 2023, according to Axios.
It subsequently raised $25 million in a Series A round last fall and approximately $100 million in its Series B. Axios reported the Series B could grow further.
The new capital comes as fintech companies increasingly use alternative data and AI-driven models to assess consumers who may not fit neatly within traditional credit underwriting.
For banks and credit unions, services such as Split Pay represent another form of competition for consumers seeking short-term liquidity to bridge gaps between income and major recurring expenses.
