Earnin

Earnin is a financial services company whose mobile app lets its members access the wages they've already earned, before payday, without hidden fees or interest.[1] Founded as Activehours in 2013, the app launched in May 2014.[2][3] It expanded its services in 2019 to include negotiating with doctors and hospitals to lower its users' medical bills. [4] In 2020, Earnin acquired and implemented a new savings feature, Tip Yourself.[5]

Earnin
IndustryFinancial Services
HeadquartersPalo Alto, CA
Key peopleRam Palaniappan (CEO)
Number of Employees200+ (2020)
ServicesEarned-Wage Access, Saving, Medical Debt Negotiation, Cashback Reward Program
URLhttps://www.earnin.com/
Launched2012; 8 years ago

History

The company was founded by Ram Palaniappan in 2013.[2] According to Palaniappan, he came up with the idea while working at a different company where he gave employees money they needed to cover expenses before payday after hearing them complain about overdraft fees. “It didn’t make any sense, because I thought I was paying everybody well,” Palaniappan said, but then he realized the problem was that employees “needed money the next day and could not wait until the following Friday. When I left the company, the people I was doing this for wanted to know if I would still do it for them,” Palaniappan said. “That’s when I realized that if I didn’t try to make it into a product, I would feel bad about myself.”[6]

The company raised $4.1 million in 2014.[3] At the time, some questioned whether the business model was viable since tipping was voluntary.[3] The company has partnered with Uber to allow its drivers to cash out after a shift.[7] It has a similar arrangement with Sears.[8]

By 2017, the company had raised $65 million in funding.[8] And in December 2018, it raised an additional $125 million.[9] It rebranded from Activehours to Earnin in November 2017.[9]

In April 2019, the New York State Department of Financial Services investigated whether the company's "tipping" system skirted New York State lending laws regulating payday lending.[10][11] An article in the New York Post said that members who do not leave tips may have their monthly maximum restricted, which may trigger interest rate disclosure laws.[12] New York State subpoenaed information from the company, including a calculation of annual percentage rates if tips were measured as fees or interest.[11] In 2019, there were also consumer complaints about glitches sometimes resulting in delays in fund transfers.[11]

In May 2019, the company began offering its users a service to negotiate for a reduction in outstanding doctor or hospital bills. The company will also negotiate installment payments for outstanding medical bills if it can.[4]The service is offered without a fee and members are asked to leave a voluntary tip for good service.[13]

In 2019, Earnin acquired Chicago-based company, Tip Yourself. In May 2020, Earnin integrated the service into their own app. Tip Yourself is a tool that provides members with "Tip Jars" that they can set up for specific savings goals such as “a trip, home improvement projects or a rainy day fund.”[5]

In April 2020, the company created a new feature giving workers access to their earned wages while working from home. The new feature was one of several changes made to help ensure continued availability of the Earnin app for those affected by the COVID crisis. The feature asks members to submit their work email address to verify employment.[14]

Services

Earnin’s main service, Cash Out, allows users to access up to $100 per day and $500 per pay period from their paycheck. Other products include Lightning Speed, a free feature for users to access their money faster by connecting their debit card; Tip Yourself, a savings tool for people to put money aside in a “Tip Jar”; and Health Aid, a service that negotiates with a user’s medical provider to try to find lower payment options on medical bills.[15]

Business Model

Instead of charging interest or a fee, the member is asked to leave a "voluntary tip" for each transaction. The app suggests multiple tip levels for every transaction.[16] The company's tip suggestions ranged from zero to $14 for a $100 transaction.[17] Tips are capped at about 15% of the $100 daily Max.[8] After a member's scheduled wages are deposited in their bank account by their employer, the company automatically withdraws the cash out and the tip.[18][11] Payments are only made for hours already worked and with a daily cap of $100. There is a pay cycle maximum transaction cap that varies by user.[15]

Series Funding

  • Series A: Matrix Partners led Series A rounds for $22M with participation from March Capital Partners, and Felicis Ventures in January 2017.[19]
  • Series B: Earnin raised an $39 million Series B in September 2017. Andreessen Horowitz led the round with participation from Matrix Partners, March Capital Partners, and Ribbit Capital.[19]
  • Series C: Andreessen Horowitz, DST Global, Spark Capital led Earnin’s $125 million Series C round in December 2018 with others contributing.[19]

References
  1. Debter, Lauren. "Want To Cash In On Your Paycheck Before Payday? There's An App For That". Forbes. Retrieved 2020-11-11.
  2. Carrns, Ann (2014-05-22). "Getting Your Wages, Before Payday (Published 2014)". The New York Times. ISSN 0362-4331. Retrieved 2020-11-11.
  3. "The Next Big Thing You Missed: Startup Offers Payday Advances Without the Pesky Loan-Sharking". Wired. ISSN 1059-1028. Retrieved 2020-11-11.
  4. Rubin, Ben Fox. "You can hire this startup -- for free -- to negotiate down your medical bills". CNET. Retrieved 2020-11-11.
  5. "Earnin Unveils Tip Yourself - A New Way to Build Savings in the Earnin App". www.yahoo.com. Retrieved 2020-11-11.
  6. Valle, Gaby Del (2019-05-22). "How a Silicon Valley startup is trying to rebrand payday loans". Vox. Retrieved 2020-11-11.
  7. "Activehours, which makes every day a payday, just raised $22 million in Series A funding". TechCrunch. Retrieved 2020-11-11.
  8. "Activehours raises $39 million for its new take on cash advances". TechCrunch. Retrieved 2020-11-11.
  9. "Earnin raises $125M to help workers track and cash out wages in real time". TechCrunch. Retrieved 2020-11-11.
  10. https://nypost.com/2019/03/28/cash-advance-app-earnin-gets-subpoenaed-by-ny-regulator-source/
  11. "A payday lender in disguise? New York investigates the Earnin app". American Banker. 2019-04-04. Retrieved 2020-11-11.
  12. Dugan, Kevin (2019-03-22). "Popular cash advance app Earnin operating in payday loan 'gray area,' critics claim". New York Post. Retrieved 2020-11-11.
  13. Reader, Ruth (2019-05-22). "This company wants to help you lower your medical bills (some catches may apply)". Fast Company. Retrieved 2020-11-11.
  14. "Earnin Offers New Feature for Remote Workers". AP NEWS. 2020-04-30. Retrieved 2020-11-11.
  15. "Earnin App Review: What You Need to Know". Credit.com. 2020-01-28. Retrieved 2020-11-11.
  16. Weisbaum, Herb (2014-08-03). "New app offers access to your pay as you earn it". CNBC. Retrieved 2020-11-11.
  17. "The Rise of Digital Tipping — From Music to Your Own Paycheck". OZY. 2019-05-08. Retrieved 2020-11-11.
  18. "How the Pay What You Want Model Can Work For You". www.bizjournals.com. Retrieved 2020-11-11.
  19. "Earnin - Funding, Financials, Valuation & Investors". Crunchbase. Retrieved 2020-11-11.
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