In addition to providing a steady paycheque to employees on hourly rates, often with variable work schedules, and so helping to smooth out the leaner weeks on an interest-free basis, California-based startup Even aims to help users manage their overall budgets. Meanwhile a number of other startups have been developing products along similar lines for this type of customer.
In the United States, lending companies that offer salary advances – generally known as ‘payday loan’ providers – have a very poor image and are subjected to widespread criticism for the exorbitant interest rates most of them charge their customers, who are usually already in a low income bracket. Now a number of startups have set out to address this segment. L’Atelier recently reported on Palo Alto-based Activehours, whose app enables hourly-paid workers to obtain an advance on wages that are due to be transferred to them at the end of the pay cycle. Now Even is tackling the controversial ‘payday loans’ market, offering to provide people with a steady paycheque so as to even out the fatter and leaner weeks. As well as providing this service on an interest-free basis, Even is also looking to help app users to manage their overall financial situation more efficiently with its automated budget management and savings tools.
The founders describe Even as a subscription service, similar to an insurance policy. The service, for which Even charges $5 a week, enables users to obtain an advance on their wages on those occasions when their variable weekly income dips, plus specialised savings assistance. The service works with a customer’s own bank account, and the platform will automatically put funds on one side for debt repayment or savings, when the situation allows. The app also includes a ‘pause’ button so that customers can turn off the service, avoiding the $5/week charge during a period of special hardship, such as losing their job.
With its base in Oakland, a much less wealthy area of California than neighbouring Silicon Valley, Even is strategically located close to potential customers. The startup has just raised $1.5 million in a seed round led by Keith Rabois, a US entrepreneur and iconic investor known for his executive roles in PayPal and LinkedIn. Even is still testing in beta version and plans to launch its mobile app for real sometime this year. The company is also discussing the development of a B2B model, which would for example enable companies that employ part-time workers to integrate the Even service into their HR setup.
The growth of personal finance platforms
In adding a budget management service to its ‘wage-smoothing’ offer, Even is joining a growing startup ecosystem which is geared to revolutionising the way people visualise and manage their personal finances. Only a few years ago Personal Finance Management (PFM) tools focused almost exclusively on the relatively well-off segments of the population, but they are now apparently beginning to change tack. Moreover, the old PFM tools were purely informative, without any action-oriented features, and the websites were not particularly attractive. By contrast, today’s startups are increasingly offering interactive tools and have moved away from mere visualisation displays towards providing real virtual assistants offering practical assistance to potential savers.
Startup Toshl, which won the Best of Show award at last year’s FinovateEurope – a conference on the future of financial technology – is a good example. The firm offers a PFM service designed to encourage users to plan their expenditure so as to manage their finances more efficiently. The startup has become known for its highly original emoticons, which change according to the user’s financial behaviour. Another feature is that it gives you the opportunity to compare your expenditure items with other people in the same social stratum, of the same age, and/or living in the same locality, and so on.
Another startup, San Francisco-based SaveUp, has set out to make debt repayment more fun. The faster you pay back your debts or set money aside, the more points you earn, which you can accumulate towards gifts or coupons. More recently, Swedish startup Qapital raised $1.3 million to fund a PFM tool comprising a suite of unique functions to help users save. One is a savings tool linked to impulse purchases, which ‘penalises’ some unnecessary and easily-avoided day-to-day spending – for example automatically forcing you to save $5 every time you buy a coffee! Meanwhile new San Francisco-based firm Digit, on which L’Atelier reported in a recent article, fully automates its users’ savings. The Digit app connects directly to your bank account and transfers available funds to a savings account whenever your financial situation permits.