US neobank Dave was hit with a data breach earlier this week

via Business Insider

US-based neobank Dave was hit with a security breach earlier this week, ZDNet reports. According to the neobank, the breach originated on the network of Waydev, an analytics platform it formerly partnered with, through which a malicious party reportedly gained unauthorized access to certain user data — including names, phone numbers, emails, birth dates, and home addresses — and is selling it on a hacking forum.

Breached data also includes users’ Social Security numbers and passwords — but the neobank says these details are encrypted. Dave said that there’s currently no evidence that suggests hackers used the data to gain access to user accounts and execute any unauthorized actions. The neobank notified customers of the incident and is carrying out an ongoing investigation.

A data breach could be particularly damaging to the neobank as it’s early on in its growth. Dave started as a personal finance management (PFM) platform — which counts 7 million users — and since expanded with the launch of Dave Banking, which it started rolling out to its 2 million-person waitlist in May.

The account offers $100 in overdraft coverage, with no interest rates regardless of credit score. It also boasts an account opening time of 2 minutes, and is intended to help younger consumers — its target audience — build credit by instantly reporting recurring payments like utilities and rent to major credit bureaus. But the neobank might need to continue differentiating: Chime, the largest US neobank, recently launched a Credit Builder Card to help users build a credit history.

Dave’s focus on customer needs could give it a niche in the neobank market — but a breach could lead customers to opt for a more established competitor. Data breaches can be extremely detrimental to customer trust — especially for neobanks, given their entirely digital structures.

Considering that Dave Banking is in its infancy compared with other US neobanks like Chime or Varo — Dave Banking presently counts 100,000 users and the neobank anticipates reaching 1 million by the end of the year, compared with Chime’s 8 million — transparency regarding cybersecurity with customer and those on its waitlist will be integral to ongoing retention and acquisition.