tl;dr
App called "even" allows people with incredibly variable income (case study is on a massage therapist, lots of money one week, little the next) to even out their income. They evaluate their income history, then offer a stabilized value, say $380/week. Weeks they make more, the application takes it and puts it aside. Weeks they make less, it either pulls it in from a reserve, or an instant loan is made.
Costs users $3/week. Which is non-trivial, but less than a payday loan company.
Brilliant from a PR perspective though for your average NYT reader.
I would kill to get an article like that written - it's lengthy, detailed, has an accurate representation of the actual function of the app with tone a that's not breathless or sycophantic, and just the right level of skepticism thrown in so that readers believe a deep, detailed analysis has been done and that this is the future.
What's the value of that PR? Attracting quality employees or boosting VC interest? Because I highly doubt their target market is reading articles about startups in the NYT.
Attracting quality employees I'd imagine. I think a twitterbot I had been using followed the user researcher in the article because she tweeted today about looking for talent.
Making automatic loans sound very similar to sms loans, which is a common cause for people falling into incurable debt. It mean less insight and less responsibility, targeted to those who lack financial skills. That could make things better in theory, or things much much worse if the incentives are to get people to take unnecessary and expensive loans.
If its only credit and this work, banks really have something to learn from this. Having customers pay you to restrict withdraws from the bank account is one those ideas that sound crazy, but sure, I can see some direct value from that kind of service. Not one I would personally pay for.
> Costs users $3/week. Which is non-trivial, but less than a payday loan company.
That does depend how much and how often you need to borrow money. If twice a year I need to borrow $50 but pay it back the next month, that's equivalent to a 13000% APR loan rate (~$150 for the convenience of borrowing $50 for a month twice is equivalent to borrowing $50 and paying back $125 the next month, 150% per month or 13000% per year).
It doesn't have the same risk of spiralling out of control, but for small short term loans this is a really expensive thing to do.
Edit - For comparison, $150/year is like borrowing $2800 at 10% and paying it off in a year.
The article opens with the story of Heather Jacobs, a masseuse whose income is volatile, and it implies that she's a prototypical Even user. But she actually seems to be an undesirable user, from the company's point of view.
It sounds as if she's struggling not just to budget but to earn enough money to pay for all her expenses, both recurring and unexpected. (She says she's often "desperate" around the end of the month.) That's exactly the kind of user that Even should try to avoid.
I'm not necessarily faulting the woman for not being able to make enough; I'm just saying that Even's ideal user should be someone who, over time, earns enough to cover their expenses, but either has trouble sticking to a budget or would prefer the convenience of an app to handle budgeting for them.
For instance, my parents (one a teacher, who got paychecks from September to May, and the other a landscape, who earned little during the winter months) could have used an app like this when I was growing up. Between the two of them, they made ends meet, but they struggled to figure out how much to save so they'd have a reserve during the months when their incomes dipped.
One thing I am curious about, which the article doesn't touch on: What happens if I have a surplus in my Even account (which the article says is kept in a savings account), and I run into a huge unexpected expense? What are my options for tapping into that surplus?
If I have the same access to it as a regular savings account, does that kind of defeat the point of the app (to prevent people with poor willpower from spending their surplus instead of saving it)? Or is it treated like a withdrawal from a 401(k), with penalties for taking the money out earlier than scheduled?
Although it sounds like she doesn't really have enough money to live comfortably on. It does imply in the article that she isn't sure of where she should spend her money. Dollar store vs. Walmart for groceries, ect. With a consistent paycheck, then she would know exactly how much she can spend on groceries and other things. Often it is the unknowns which cause people to mismanage, not that the managing was impossible to begin with.
I think the fact that her pay fluctuated from between $90 and $700 is what makes her the "prototypical" user. I'm sure if she had a few high paying weeks, she wouldn't be desperate at the end of the month.
Also, I checked out their website and it seems that you can withdraw all of the money that you have in Even if you need it immediately. And they put a pretty big emphasis on the fact that when you start, you get hooked up with an Even employee to help guide you through your finances and using the app. It isn't just a download and go setup. It seems to me that there is a lot of human interaction involved with actually using it.
> She says she's often "desperate" around the end of the month
Depends on the definition of "often." If she's desperate at the end of the month 60, 70, or 80% of the time, you're clearly right.
If she's desperate 40, 30, or 20% of the time, then I'd say she might be the perfect user that Even should try to attract. (As long as the extra $156 a year doesn't push her over 50.0% of the time!)
> What happens if I have a surplus in my Even account (which the article says is kept in a savings account), and I run into a huge unexpected expense? What are my options for tapping into that surplus?
From their FAQ:
> Can I withdraw the money I've saved with Even? Yes, of course. It's your money. You can withdraw your Even savings by talking to your Evener in our app.
> It sounds as if she's struggling not just to budget but to earn enough money to pay for all her expenses, both recurring and unexpected. (She says she's often "desperate" around the end of the month.) That's exactly the kind of user that Even should try to avoid.
I'm not entirely convinced of that. She could also be the very type of customer that they'll want for their expansion (i.e. into a budgeting service). They could evolve to help people both stabilize their incomes and learn how to budget better to improve overall stability
Looking at their website (https://even.me/)- this app both acts as a bank itself and interacts with a person's bank account. Some interesting notes - even is actually FDIC insured, so at least the money they are moving out of a person's bank account is insured in case the company collapses. Their linkedin page also notes they are...
"A bank that automatically manages its customers' finances. Pays their bills. Balances their budget. Saves and invests. And at the tip of the iceberg, gives each and every customer a weekly paycheck of purely disposable income. "
So not only is the income you get each week stabilized - the long term intent is the income you get is solely above and beyond bills and, presumably, investment goals.
At some point - Even could issue debit cards, link up with paypal accounts, and literally supplant the banks that they are working with currently.
Loans are a tricky concept, and Even is attacking a very appropriate market - more than 69% of payday loans are used just to pay normal bills, counter-intuitive to what I would have guessed (emergencies such as health and auto-repair are only around 16%).
Some math: $3 a week = $156 a year - savings of ~$360 versus average payday loan interest. 12 million people use at least one payday loan during a year, with numbers skewed as a higher % of population in states with "looser" regulations on payday loans (6.6% of pop) rather than states with "very strict" regulation (2.9% of pop). Average loan = $375, 8 separate loans taken during a year, plus $520 on interest payments across all loans. 6 of those 8 loans are actually extensions of just 2 loans!
If regular bills are budgeted for, and the money is literally reserved by Even, that eliminates the need for 70% of all non-extended payday loans. Add in budgeting for emergencies, and 84% of payday loans are gone - so whatever interest they do or do not charge for the other 16% is not going to approach normal interest costs.
As jawns points out - majority of loans are because people can't afford their bills...
Since they are FDIC insured - I'll assume they operate like a standard credit union overall and are buffering people's loans using other people's savings...again they also claim they want to invest people's money for them.
> If you have no money saved, Even will boost your pay with interest-free credit. You'll automatically pay the credit back the next time you earn more than your average pay.
... then later
> ... Even is not a lender and Even does not provide loans.
I'm guessing this is to stay on the right side of lender regulations, but talk about being slippery with semantics!
Very common. My assumption is that frontend wears the pants in these companies and tells backend just to provide barebones with (many times partial) content and structural ULs for menus and related stories.
Amidst all these verbose vignettes of precious characters, what DOES Even DO? Oh, ok, there's one paragraph in there that sheds some light:
"The app then holds back an “Even cushion” — a savings account it manages for the user. In the demo I saw, the app, drawing on a sample bank account, reported that “if you earn less than $380, Even will automatically boost your paycheck. If you earn more than $380, Even will automatically pay back boosts and save the extra to your cushion.”
This interest free loan makes it VERY susceptible to fraud or abuse.
Lets consider for example, a technology contractor, making $120,000 a year from various contracting jobs. The contractor could sign up for Even, and then retire, collecting a $2500 "paycheck boost" interest free.
I think this idea has a lot of value, but their current business model can't be profitable.
The interest free part of course limits them from generating profit directly that way, but alternate revenue models are certainly possible on top of the $3/week users have to pay on a continuous basis.
> The contractor could sign up for Even, and then retire, collecting a $2500 "paycheck boost" interest free.
I'm not sure how things play out legally with them claiming to not be a lender, but I doubt the Even team hasn't considered something so basic as how to recover money they've "credited" to someone's account if the income they see drops to zero and stays that way.
In cases of outright fraud the person wouldn't just be risking collections or a court judgement to recover the money, they'd probably be facing criminal charges.
Just because something is illegal doesn't make it any less costly to enforce. I agree that Even probably has some recourse, I'm just not sure what it is.
Part of me thinks that this is Even's first pivot. See if there is a market and then see if and how they can monetize it.
It sounds like the signup process will be fairly high-touch, to evaluate whether they're a customer Even wants. Given that this involves a fairly complete opening of the kimono, I doubt Even would let someone who makes $120k/year sign up.
If customer support requirements are high at sign up but low for customer lifetime then it shouldn't matter as long as their retention is good and lifetime is long. I don't know, it's not my business plan. I'm just pointing out they're unlikely to have a signup process that lets people with high levels of income in.
This is absolutely not my area of expertise, but if I had to guess:
* Spend a fairly fixed amount of money developing the app and related infrastructure
* Keep a slush fund for covering loans
* Potential customer provides their bank account info, run it through a risk analysis program
* Have a human approve or deny the customer based on that program's results
* If approved, give them some coaching & onboarding training
* Largely ignore the customer unless they go in arrears, make $12/month for your SaaS offering
Note that monthly cost isn't much different from something you'd pay for a Shopify store, say. And they have very high touch onboarding in some cases.
Shopify makes their money on the transactions and their pricing model scales up to $180 per month.
I honestly believe that this is an MVP and the "Pay Boost" might being interest free after they figure out how to conquer the regulator hurdle of loaning money.
That was just an extreme example. If I were a freelancer and having a great month / 3 months / year I would quick sign up for Even and extend the ride a little longer.
So, I left a couple months before the final audit before going to public launch.
As far as I know, they were going to have to change a good bit of stuff focused around the taking out loans.
The sole investor cut his losses since we were already over time and budget. Also, we were having custom development done from the bank that hosted our accounts and the bank that provided us with credit limits. And we were going to have to have them go back and overhaul a lot of their system that had been changed for us, which was extremely expensive.
What is to stop someone simply opening two bank accounts. Then paying their unsteady income into one and then transferring a steady amount of money into the other.
Combined with the old adage about spending less than one earns and the result is happiness.
The article is very good and the business idea seems solid too. It reminded me of the article from last week about how etsy is a "B corporation" and they've committed to put social and environmental concerns before profit. It sounds like that would be a good choice for this company too. Providing financial products to poor people is a slippery slope if you're trying not to be evil. Payday loans, rent a center, layaway, check cashing all serve to perpetuate a cycle of poverty. If even can be a profitable company and also help to break that cycle it will be really great.
I wanted to really hate this, but it sounds like a really interesting idea.
It seems like it would either be very capital intensive, or it's going to need to operate like a bank. Also, folks in these situations tend to be very transient and have fluctuating income. How do you establish an adequate virtual salary when the terms of the person's employment change?
Forget about massage people -- they are a bad example because two or three customers may make for a windfall-like experience. How about a person who works at the Gap or BestBuy? You might get 35 hours one week, 20 the next, then 18 for a month.
Thank you for double posting the infomercial for an app (https://news.ycombinator.com/item?id=9460628) within a mere 6 hours of it's last appearance. (HN really should have a built in filter for this).
Also a big thanks to the new york times for their uninterrupted commitment towards high-quality journalism.
Those links were posted by different people. You might want to check ColinWrights submission history - they submit many interesting articles. They're not shilling or astroturfing for this company and your assumption is a bit rude because it's so easy to check.
About the dupe: This submission has a clean url, the earlier submission has a bunch of cruft which is probably why the dupe filter didn't spot it.
The article author obviously is astro-turfing for the company and if people want to link infomercials passing for journalism I can have an opinion on that. (I agree that I did not phrase my first comment well and it makes it sound like I implied ColinWright's involvement specifically, I've fixed that).
That doesn't change the fact that it's a duplicate from within 12* hours and should get removed.
> ANYTHING that helps get rid of those scum is a huge improvement.
And these guys are truly crusaders for the working-class poor that are going to fix the system? Or they are just going to cash in on updating payday-loans to the 21st century Iphone version.
I mean it's a good idea and I'm sure they can be very successful if it's well executed. AND I have no doubts they will be just as scummy-bag as the market & regulations allow them to be. Which is very American and I guess it's fine. But please excuse my low tolerance for packaging the profit motive of a company as helping the working class poor.
If you think that even.me is exploiting their customer base, but is otherwise a good idea, then I sincerely recommend you try to create or help someone who will compete with them, offering similar service. Perhaps for $2.50 a week.
And no, they're clearly not going to "fix the system," but it sounds to me like their idea would be good for some people. Would actually help them.
>"But please excuse my low tolerance for packaging the profit motive of a company as helping the working class poor."
They're not mutually exclusive, to be honest. You can make a profit AND help the target group. Additionally I hope you're honest as well, and say that's okay instead of bashing them for "making a profit" while helping the needy.
On a curious side note... Where abouts exactly do you place "non-profits" in this whole thing? What about government?
> They're not mutually exclusive, to be honest. You can make a profit AND help the target group. Additionally I hope you're honest as well,
Exactly - and talking about the app "helping the needy" is especially dishonest. Sure she can pay $3 a week instead of a $35 over-draft on her Bank Account -- and if you think that's help then I assume you've never had to live on minimum wage.
> Additionally I hope you're honest as well, and say that's okay instead of bashing them for "making a profit" while helping the needy.
To be clear, I did not bash the company. They picked a particularly scummy industry that hasn't been disrupted by technology and they are doing their thing -- and the job of their PR department is to sell their technology and part of that is playing up "help the needy".
On the other-hand I have a real problem with this as an article. It doesn't start off talking about an app, instead it introduces a particular person, draws in the reader's sympathy to that person's difficulties and then resolves that into marketing a product - basically making a joke of the actual problems (http://en.wikipedia.org/wiki/Income_inequality_in_the_United...).
No, I don't seriously believe there is any such journalist who interviews someone living on an unpredictable near-minimum-wage and whose honest first impulse and thought is "they need an app to help them". This is a shill if I've ever seen one.
"Exactly - and talking about the app "helping the needy" is especially dishonest. Sure she can pay $3 a week instead of a $35 over-draft on her Bank Account -- and if you think that's help then I assume you've never had to live on minimum wage."
It's not up to me to decide, nor does my income-level have anything to do with the validity of my arguments. You simply have to answer "is this person better off with this thing X".
If we go under the assumption that steady-income is better than unpredictable income, then the answer has to be yes because this app satisfies that requirement. Let's not confuse that component with discussion about "real" help for the needy. There may be better ways, but that's a separate talk of "what is the best help for the needy".
> It's not up to me to decide, nor does my income-level have anything to do with the validity of my arguments. You simply have to answer "is this person better off with this thing X".
By your logic of: better off == "helping the needy" == Saving a few $bucks
General Mills cereal coupons are "helping the needy". That's seriously complete bullshit.
If you are going to use strong terms like "helping the needy" I would expect e.g. improved quality of life or another reasonable indicator backed by a well presented position and/or statistics.
> my income-level
I very much doubt any person living on minimum wage would say "Yes, my quality of life would be improved by a budgeting app for my IPhone". But if you had lived on minimum wage at some-point and honestly thought so, I would have considered it relevant.
> Thank you for double posting the
> infomercial for your app ...
It's not my app, I have no connection with it, and I didn't post the other submission. I saw a fascinating discussion on Twitter that was prompted by this particular article, so I submitted the article to see what the HN community might add to it.
Costs users $3/week. Which is non-trivial, but less than a payday loan company.