The financial lives of many Americans are whipsawed by 3-5 predictable financial events that repeat with high frequency, the dates of which are entirely outside of their control: rent or mortgage payment, car payment, credit card payment, student loan payment, and payroll — when they get paid.
The bi-weekly or semi-monthly system of payroll is as much of an anachronism in 2017 as scheduled television. But while we now have on-demand and DVRs for TV, payroll is still stuck in “regularly scheduled programming” — every other Friday, or twice a month — to the detriment of tens of millions of people. Those who live paycheck to paycheck, actually an astonishing 78% of full time working Americans, often must rely on payday loans, overdrafts, and high interest credit card debt to bridge the gap. That gap occurs, to put it simply, because they can’t “reschedule” their payroll to pay them on a more frequent basis for work they’ve already done.
Imagine that you were in Florida earlier this month, on a semi-monthly (2x a month) payroll, waiting for the hurricane of the century, having earned a week’s worth of wages but not having been paid yet. You need money for last minute travel to evacuate, or to repair a leak, or to board up all your windows, and that requires an extra cushion you just don’t have. It’s possible no matter how much you need that money, you might not be able to find a last minute, quick (and safe) loan — for money that you’ve actually already earned and are legally owed. It’s locked up in “payroll,” invested by your employer in various ways, despite the fact that you absolutely need it.
The idea of payday loans is not new. The “accounts receivable” for workers is about $1T per year, and creates about $100B a year of overdraft fees and high interest loans — if people can even get them. Payday loans historically have had the potential to be a slippery slope for consumers into financial distress: opaque systems and steep fees that are hard to repay and set individuals back further than where they started. For many Americans living paycheck to paycheck, that kind of slide into debt can be extremely difficult to recover from.
Earnin’ represents a major paradigm shift for how to think about earnings and when they are owed. It’s “time shifting” for your earnings, creating an “earnings account”, which allows employees to see, track, and most importantly access exactly what they’ve earned in real time. Users can not only see what they have accrued from their employers on a daily basis, they can use it, when they need it.
Most remarkably, Earnin’ makes this available for free, and relies entirely on voluntary contributions instead of fees. With every transaction, Earnin’ instantly pushes money to the account of a consumer, who can decide what (if anything) to pay. Employees from more than 25,000 companies now use Earnin’ with regularity to improve their lives. The stories they tell are passionate and heartfelt, and the ethos of the company has created a real community.
Why set up a company and revenue model this way? When Ram, the CEO, was running a previous company, he’d often write personal checks out to his hourly employees when they needed access to their paychecks – using money out of his own pocket in order to prevent them from using bad financial products. He knew they were working — he ran the company and saw them every day! — so there was no risk to him. When he sold that company and moved to California, many of his former employees would ask him if he could still do “that thing” and he obliged, keeping track of things on spreadsheets. His former employees told their friends, the spreadsheets kept growing, and Earnin’ was born.
We are thrilled to lead a new round of fundraising for Earnin’, and I’m equally thrilled to join the board to help Ram, the CEO, take the company to greater heights.