Financial insecurity can be expensive, living paycheck to paycheck and with overdraft fees, penalties, higher interest and mortgage rates. Seven out ten households in America live paycheck to paycheck. Ram Palaniappan , founder of Earnin, noticed that one of his employees had to get payday loans to pay her expenses. Though she had worked her hours she got paid only after two weeks and her bills were due now. He decided to advance her salary as soon as she put in the hours. Soon the word got around, and other employees and non-employees reached out to Ram to avail of their earned wage. He realized the inequalities in our society further accentuates the mismatch between when an employee earns and when they get paid. He started Earnin to break down the barriers of an outdated financial system, to build new solutions that work for everyone. Using the time attendance systems already in place, they are able to provide Earned Wage Access – where their users can access the money as they earn it. This helps the users synchronize their income and expenses. They offer these services without any mandatory fees. They charge a nominal $2.99, only in case of instant transfers – which is much lower than the $15 that payday loans charge. I ask Ram – how can such a business model be profitable? To hear his answer, tune in to this weeks episode.
Mentions: Prof. Ananth Iyer, Purdue University
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