PayPal and Salesforce CEO's Even investment show momentum for early wage access
The coronavirus-induced recession has broadened the addressable market for early wage access, and that's drawing investors such as PayPal and Salesforce CEO Marc Benioff, who just poured a fresh funding round into Even.
Even provides a financial-wellness app to its active users that includes an early wage access function called Instapay. This feature allows a worker to gain early access to earned, but not yet paid wages ahead of the employer’s typical payday period.
Joining the new investments from Benioff and PayPal are two additional venture capitalist firms Valar Ventures and the Founders Fund. The financial terms of this latest investment round were not disclosed. Valar Ventures had invested in several previous fundraising rounds.
Before this new round, Even had raised $52 million in four rounds since 2014, according to Crunchbase, a website that tracks investments in private companies. Even's other investors include Khosla Ventures, Qualcomm Ventures and Silicon Valley Bank.Early wage access has been pushed into hyperdrive as the U.S. economy struggles through a coronavirus-induced recession and more consumers need faster access to money that they’ve already worked for, yet have not been paid by their employers.
Many employers are capitalizing on EWA to quickly recruit workers, such as Branch’s recent integration with Domino’s to enable the pizza chain to hire 10,000 new drivers and pizza makers to meet coronavirus-fueled demand. DailyPay, another EWA firm, has seen strong demand for its solution by companies on hiring binges.
“Early wage access doesn’t affect the employer since it’s money they already owe their employees. It is a real plus for people, especially those living paycheck to paycheck,” said Lillian Roberts, founder and CEO of Xendoo, an online bookkeeping and accounting platform for small businesses.
Even offers its service to employers, which in turn offer the app to their employees and typically pay for most, if not all, of the monthly subscription fees involved. Other models, such as Earnin use a tip-based model paid for by the employee or a per transaction fee such as done by DailyPay. In some cases, EWA providers may also provide a debit card to earn interchange when the employee uses the card to make purchases, such as done by Branch.
Even reports 99% of its employer customers pay the monthly subscription fees and with its signature client Walmart, the retail giant absorbs 100% of the fees. Of the roughly 1.5 million Walmart associates, over 540,000 are active users of the Even app and more than half use it on a daily basis. At Walmart Even partnered with PayActiv for the instant payments. Even has since created its own payment process for other clients.
Even projects an employee’s net pay at a time when 50% of them have inconsistent earnings on a paycheck-to-paycheck basis. The bank accounts are offered through Wells Fargo and are meant to help an employee close what Even calls an “opportunity gap.” This gap is what Even says is keeping people from reaching the middle class.
“You need a surplus. Everything costs money. The objective here is to solve that opportunity gap,” said Jon Schlossberg, co-founder and CEO of Even.
To keep consumers from becoming overreliant on its on-demand pay product, Instapay, Even limits the amount that can be withdrawn to 50% of their net pay during a pay period.