Part of Our Money20/20 Interview Series
By John San Filippo
Money20/20 USA, the fintech mega-conference, was once again held in Las Vegas, this year. And once again, Finopotamus was onsite talking with industry leaders about a wide range of topics. These interviews are captured in this series of articles.
Finopotamus spoke with Instant Financial’s CEO Tal Clark about the many benefits of giving workers near instant access to their earned wages.
Finopotamus: Earned wage access is an increasingly popular topic. What’s your definition of earned wage access and where does Instant Financial fit in that space?
Clark: Earned wage access is a term that has come to define the overall market that we participate in. Our product is instant pay. We started in late 2016 and we’re very active in the space. Not only do we provide access to instant pay, which is the payroll, but we also provide access to instant tips, as well. We make sure employees, each day they work, have an opportunity to access the wages that they've earned at no cost, which is what separates us from some of our competition.
Finopotamus: What’s Instant Financial’s mission?
Clark: The entire market is focused on providing access to earned wages. Instant specifically is changing the way that employers pay employees. We believe that over the next three to five years, each employee in the U.S. will have a benefit that is built around earned wage access. It becomes a benefit within the employer base and an expectation of employees. We just finished a survey with the Center for Generational Kinetics that shows that most people hired today – millennials and Gen Z – expect access to earned wages.
Finopotamus: How big is the market?
Clark: There are 60 million Americans who are candidates for earned wage access and that will continue to grow. We believe it could be closer than 100 million. But only 15% to 20% of the market has been addressed so far. There’s a lot of growth ahead for the market as a whole.
Finopotamus: How do you define a so-called candidate?
Clark: Honestly, it’s anyone who's working today. Plenty of studies have shown that most Americans live paycheck to paycheck. A candidate is anyone who'd like daily access to their wages. We believe that ultimately it doesn't matter how much you're making – whether it's hourly or salaried wages – that if you earned them today, why not access them today? It started with quick service restaurants and retail. However, we're seeing great traction in the staffing industry right now. Logistics and manufacturing will all be part of that going forward.
Finopotamus: Who is your customer, the employer or the employee?
Clark: Our client from a contracting perspective is the employer, but our services are ultimately provided to the employee. We have terms and conditions with the employee associated with our program and card, and that's who we're providing services to every day.
Finopotamus: Describe the user experience from an employee’s perspective.
Clark: You download the Instant app, use the app to enroll in instant pay, then you go to work. Let's say you work at Papa Johns. You do an eight-hour shift and earn a hundred bucks. You leave work and we get time and attendance data in near real time. We’ll provide you with an in-app notification that says, hey, you have $50 available to you in instant pay. You simply tap on that and it's immediately loaded to your account. At the end of the payroll cycle, the employer processes payroll just as they normally would. Once that payroll deposit hits your account, we recover the advances that we provided
Finopotamus: Just to be clear, you provide access to 50% of gross wages so there’s always enough left on payday to cover taxes, etc.?
Clark: Yes, absolutely. At the end of the day, the net is probably more like 70 or 80%. We limit access to 50% because we don’t want employees to end up with a zero check on payday. We found out through our data that that's the best-case environment for the employee, as well.
Finopotamus: How does the employee access that money?
Clark: The employee has an instant account with us represented by a debit card. The advances are immediately loaded onto that, and we use the same account to recover the advances on payday.
Finopotamus: What institution holds the funds represented by the employee’s debit card?
Clark: Sutton Bank is our issuing bank. However, if a large employer has a relationship with a credit union, we can set up a relationship with that credit union. I've had conversations with credit unions that represent large employers. In that case, they would be the issuer and accounts would be set up there, as well.
Finopotamus: How much does it cost the employer to participate?
Clark: We're not charging the employer or the employee. We depend on interchange revenue associated with the card.
Finopotamus: If you were to partner with, for example, a large single-sponsor credit union, from a technology standpoint, how would the integration work?
Clark: We're integrated with a number of other financial institutions today. There's a couple of ways to do it, but our preference is to integrate as a white-label solution into that financial institution's mobile app. Then we'll figure out a revenue share between us and that institution. There's are setup costs and integration costs and some technology costs for the institution, but there’s interchange revenue waiting for them at the back end.
Finopotamus: How do you see the market evolving?
Clark: This is going to become table stakes from a benefit perspective for employers. And to the extent that a financial institution is working with employers, they're ultimately going to need to provide this service or somebody else will. I think they need to be in the market and find the right partners to do it with. We certainly can provide that service.