Crystal Cox/Business Insider
- Earnin is partnering with employers to get in front of more customers.
- The employer partnership program is a new channel to reach users, rather than a shift toward a B2B business model, which is used by some of its competitors including DailyPay and PayActiv.
- "If the employer is offering this and the employer has vetted the vendor, they're even more likely to trust it," Ratesh Dhir, head of B2B at Earnin told Business Insider.
- Earnin is targeting businesses that may not have the time nor resources to integrate the startup in its payroll systems.
- Earnin has raised $190 million to date from investors including Andreessen Horowitz, DST Global, and Matrix Partners.
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Earnin, the earned wage advance startup, is trying a new way to reach customers: their employers.
And its service, which is aimed at hourly workers, doesn't require the employers to change their payroll process. It works directly with employees by tracking how much they're working - either by having users submit timesheets or allowing their location to be tracked via GPS on their phones.
Until now, the app-based startup has marketed its earned wage access product directly to users, but it just launched an employer partnership program in an effort to add more customers.
While Earnin competitors like DailyPay and PayActiv have built infrastructure to integrate with employer's payroll systems, Earnin will allow employers to simply offer the advances on earned wages to employees as a benefit without changing their setups.
Earnin has raised $190 million to date from investors including Andreessen Horowitz, DST Global, and Matrix Partners.
Without a stated interest rate, these wage advance startups aren't regulated like traditional lenders. And businesses like Earnin' - which do not charge stated interest rates but instead request optional "tips" - are currently exempt from the Consumer Financial Protection Bureau's Payday Lending Rule.
In August 2019, the New York State Department of Financial Services announced it was leading a multi-state investigation into payroll advance companies. The probe is investigating whether these companies' tips or membership fees could be seen as interest rates, and therefore should be regulated like loans.
The investigation spans several companies, including Earnin. In January, the DFS told Business Insider that the investigation was ongoing.
Growth in earned wage access
Earned wage access means giving workers the ability to draw on cash they've earned in between paychecks. The amount a user can access prior to payday is limited to the number of hours worked.
It's a growing space, with several startups targeting those living paycheck-to-paycheck with an alternative to the traditional payday lenders.
Earnin is one such startup, which is available to workers regardless of their employer. Instead of linking into companies' payroll systems, Earnin verifies hours worked via timesheets submitted by the user or GPS tracking on a user's phone. The GPS tracking feeds what the startup calls "Automagic Earnings," which automatically tracks hours worked based on the address of a user's workplace and how long they spend there.
Users can draw up to $500 per pay period, and new users start at a limit of $100 pay period. Earnin links into users' bank accounts to verify direct deposit amounts and pay schedules. It debits the amount borrowed in a pay period from a user's next direct deposit.
Earnin charges no fees or interest, instead operating under what it calls a "community-supported" model, where users are encouraged to "pay it forward" through "tips."
In addition to earned wage access, the startup offers a budgeting tool, a feature to help avoid overdrafts, and a free service that negotiates down medical bills.
A 'zero integration' partnership model
B2B players like DailyPay integrate into companies' payroll systems to verify the number of hours an employee has worked. Earnin's B2C product isn't changing for users, nor does the employer partnership require any system or process changes.
"What the employer program is about is generating awareness within that organization to ensure that all the people who need Earnin can actually access it," said Ratesh Dhir, head of B2B at Earnin.
Partner employers will have access to a dashboard that shows, on aggregate, how much the service is being used. Earnin said that employers won't have access to individual employee usage data.
Hourly employees are a big part of Earnin's business, given their paychecks can vary week to week, said Dir. So Earnin is looking to industries like retail, healthcare, and hospitality for these employer partnerships. It wants to sign on 20 to 30 employer partners per quarter this year.
Earnin
Ram Palaniappan, CEO and founder of Earnin
Employee partnerships
Earnin's "zero integration" model, Dhir said, is targeted toward businesses that may not have the time nor resources to integrate with startups like DailyPay and PayActiv.
Integrating with a company's payroll systems can be costly and time-consuming, said Dhir.
"The biggest barrier to entry for an employer who wants to offer this service to their employees is integration," said Dhir. Having a third party like DailyPay or PayActiv work with a company's systems requires dedicated resources and could take weeks or even months.
With Earnin's partner program, employers can offer Earnin at no cost. The company pitches the service as an employee retention tool and a way to reduce absenteeism at work.
Assisting Hands Home Care, a home care services company, is one of Earnin's early employer partners. It wanted to offer Earnin to match options available from the likes of Uber and Starbucks, but didn't have the budget or resources to do a major implementation, an Earnin spokesperson said.
The employer partnership program signals Earnin's shift toward more formal distribution channels, which could help make users more comfortable with the product.
"If the employer is offering this and the employer has vetted the vendor, they're even more likely to trust it," said Dhir.