In 2011, the outdoor clothing company Patagonia placed a full-page Black Friday ad in the New York Times. Right above a photo of the company’s trademark item was a big, bold headline: “DON’T BUY THIS JACKET.” The ad caused quite a stir (plus a bump in sales), and left many wondering why a consumer goods company would tell people not to buy its products. Critics claimed it was simply a PR stunt. But the ad wasn’t actually trying to sell a jacket; it was trying to show how Patagonia aligns its business with its mission to “inspire and implement solutions to the environmental crisis.”
Patagonia had a choice. It could focus on short-term outcomes, ignore sustainability, and create high-priced goods with low production costs to turn faster profits. Or it could consider the long term and steer its business in the same direction as its values. By doing business this way, Patagonia has become known for responsibly made products, loyal customers, and a strong employer brand. It’s a riskier path that requires more persistence, but it seems to be paying off.
The truth is that many businesses have this choice, and that includes those in the financial industry. So what does this look like when it comes to the new breed of fintechs that offer earned wage access (EWA)? For the answer to that, we can look back to Patagonia: Some EWA companies need consumer dependence to succeed. But others are invested in people experiencing better outcomes — to the point where their business can only survive if those good outcomes materialize. Here’s what that looks like.
Just to be clear, Even is an EWA provider and not an outdoor clothing company. But like Patagonia, we have a mission: to even the playing field for creating a better life. Our number one goal is to have a positive impact on our members’ financial futures.
The thing is, in order to have a positive impact a business needs to think beyond the short term. Patagonia could cut its production costs and sell its stuff for more money. Instead, it chooses to invest in long-term initiatives that will create better outcomes for all of us, like renewable energy and recycled materials.
An EWA provider should think similarly. Only offering earned wage advances is a sure way to make money: When employees use on-demand pay, the provider takes a fee. But this doesn’t create better outcomes in the long term. That’s because while EWA is important — the alternatives being predatory payday loans and overdraft fees — employees need much more than that to make progress.
Having access to money brings an important element of stability to workers’ lives. But according to experts at the BlackRock Emergency Savings Initiative and the Financial Health Network, employees also need better tools for planning, spending, and building emergency savings. The foremost researchers on this subject agree that when employees are equipped with these things, that’s when they’ll make real progress. It’s also when businesses will see returns on their investment.
Patagonia drew a line in the sand: It does not want to succeed at the expense of its mission. When it comes to EWA providers, that same line of thinking can bring incredible value to the people who use the product.
In our case, we don’t make money unless the employees using our product make progress. That’s because Instapay, our EWA feature, costs a lot for us to provide. So we’re incentivized to reduce how often employees need to use it for short-term liquidity.
How do we do that? We work really hard at helping employees move away from a place where they need to use EWA regularly. We spend the majority of our company resources on features and programs to help employees build their savings, get bills paid on time, and track their hours and earnings. If we create enough value for employees that’s not EWA, they’ll keep paying for the product that’s helping them make progress — and they’ll tap fewer of our resources using Instapay.
This is in direct opposition to the way a lot of EWA providers work. Generally speaking, they work on a per-use fee model. Every time someone accesses their pay early, the provider gets paid. They’re dependent on continued EWA use in order to see business returns, which means they’re not invested in better outcomes for your employees. In their eyes, it’s better if workers stay stuck and don’t progress beyond the point of needing EWA. If the employee makes progress, the EWA provider’s business suffers.
We also choose to operate on a membership fee model because it’s healthier for workers. In fact, the National Consumer Law Center cautions that while EWA can be a useful solution, it needs to be implemented in a way that limits fees and prevents employees from incurring more debt.
We do this by ensuring our members only pay $8 per month for Even (although employers can choose to subsidize the membership, either partially or in full). Based on EWA usage models, this ends up being significantly less expensive than other EWA providers’ per-transaction models. A subscription model means employees aren’t being dinged with fee after fee when they’re already in a financially vulnerable position — it’s still $8 per month, even if they take an Instapay every single day.
We also automatically unsubscribe our members and stop charging them if they stop using the app. If our goal is to help employees build financial wellness, we have no business taking anything from them for a service they’re not using. Anyone who is unsubscribed can still access any of the money they’ve saved, however.
If your employees are asking for an EWA solution, we encourage you to listen. However, if you also have a goal to help your workers build stronger financial lives, and a stronger bond with you as an employer, we’d love to talk about how Even’s EWA solution is the right fit.
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