Every Day is Payday

By Tim Newton

Ram Palaniappan was having a conversation with an employee while he was president at UniRush, a prepaid debit card company. She mentioned she had a bill due the next day, but payday was the following Friday.

“She had already worked for half the week, so I told her we would pay her for the days she had worked that week. But I couldn’t make our payroll system do that,” says Palaniappan, who earned a master’s degree in management from Purdue in 2000. “So I told her I would give her the money she had earned and we would settle up when payroll runs. I did that for a number of employees in the office, giving them access to their earnings for the hours they had worked.”

When Palaniappan left Cincinnati and moved to California, his former office mates asked if they could continue the arrangement. He built a web form for them to use and continued to give access to their earnings for days worked prior to their scheduled payday. But when people he didn’t know started to use the form, he decided to make his informal arrangement into a product.

“If you give people access to money they’ve already earned, life is much simpler. They’re paying their bills on time with no more late fees, no more overdrafts, no more payday loans. I realized that if I didn’t make this into a product I would feel bad about myself,” he says.

The offering is a non-recourse product, meaning that if customers do not repay EarnIn they will not face collections or reduced credit ratings. Instead, consumers who don’t repay are simply not allowed to use the Cash Out product, but they can still use other company offerings. Several companies, including Home Depot, Walgreens and FedEx Office, make their companies aware of the benefits of Cash Out.

EarnIn isn’t the first foray into new technology for Palaniappan. His former company launched RushCard, one of the first prepaid cards that allowed users to cash their paper checks for free.

The entire idea behind giving consumers access to their wages before a traditional payday may sound radical to some, and Palaniappan admits that there were skeptics at the beginning. But he says that’s normal for disruptive ideas.

“If you go back to the beginning of the automobile, some wanted a ‘three flags’ rule to require that every car would have three people carrying flags — one in front, one in back and one on the side — so that pedestrians wouldn’t be run over,” he says. “When the ATM was introduced, many thought that the only things people would need cash for at 3 a.m. were alcohol, gambling and prostitution. We’ve seemed to survive pretty well with both of those things.

“It’s easier sometimes to build technology than to convince people of the need for it.”

User benefits

EarnIn offers multiple products to consumers. In addition to Cash Out, Early Pay gives users access to their entire paycheck up to two days early without needing to change their bank, with a fee of $2.99 per early paycheck.

Live Pay, which is available for $2.99 per month with autopay, can “stream” a portion of their pay (up to $1,500 per pay period) directly to customers as they work, similar to how Spotify and Netflix stream music and shows instantly on demand. Instead of waiting for a scheduled drop, like a CD release or TV broadcast, streaming gives you what you want the moment you want it. Live Pay applies that same model to money: Your earnings flow to you by the second, giving you continuous access to the paycheck you’re already earning. Since launching in July, more than 300,000 people have signed up for Live Pay.

EarnIn also has a credit monitoring feature and offers Balance Shield, where users receive a notification that their bank balances are falling below a certain limit that the user establishes. Most recently, EarnIn launched a Payroll product as well, with the goal of getting workers closer to controlling the timing for receiving their paycheck. EarnIn Payroll is providing new and innovative solutions for payroll service providers, employers and frontline workers. EarnIn’s payroll software is already being used by 10,000 employers today.

"We think of paychecks as digital products. Imagine if your other digital products worked like payroll… your emails only left your outbox twice a month. It would feel absurdly outdated."

“Academic research has shown that there are benefits to products like ours,” Palaniappan says. “In addition to users avoiding overdrafts and late fees on bills, they can go to the dentist when they have a toothache instead of waiting for payday. Wages go up as well, because attendance is better and motivation is higher if people know they can access their money at the end of the day.”

He adds that many users fill their gas tanks $10-15 at a time, and if something unexpected occurs, they may miss work. Using EarnIn, they can access the pay they earned from the day before and avoid being absent.

Back to the future

Before the Industrial Revolution, workers tended to be paid daily. Palaniappan says with today’s technology, there is no longer a need to wait every other week or every month for employees to receive their wages.

“We think of paychecks as digital products,” he says. “Imagine if your other digital products worked like payroll…your emails only left your outbox twice a month, or Google only gave you answers on the first of the month. It would feel absurdly outdated. Yet that’s exactly how payroll operates today. There’s no reason getting paid should be stuck in the past.”

EarnIn consumers are pleased. The company, which advertises nationally, has received 750,000 customer referrals and earned 550,000 five-star ratings across all app stores. New products are being launched and Palaniappan hopes to continue to make an impact for working Americans.

“It’s pretty simple,” he says. “People who have access to the money they’ve earned have better outcomes. The more people we can help, the better.”