How technology helps millennials to save: Q&A Special

Posted Jul 25, 2018 by Tim Sandle
Many people, find it hard to save. Trends suggest workers paid biweekly are 50 percent more likely to need cash between paydays than those paid weekly. David Claffey, Head of Communications at fintech company Earnin explains more.
The cycle of payments is a factor in terms of saving, even though weekly pay is lower on average than a biweekly paycheck, it allows for much-needed budgeting flexibility. With millennials, saving rates are even lower.
There are technological solutions that can help, according to David Claffey, Head of Communications at Earnin. Earnin is an app that allows anyone with a job and a bank account to get paid for the work they’ve done the same day they do that work – they don’t have to wait for their paycheck to come, which is especially helpful if they have certain bills due on certain days.
Digital Journal caught up with David Claffey to look at savings trends and his digital solution.
Digital Journal: What are the conventional ways for people to be paid for their work?
David Claffey: We are nestled in a period of extremely low unemployment, yet surprisingly stagnant wage growth, so not much has changed in the way Americans are traditionally paid. At Earnin, we break down our users into a few buckets. First, we look at whether the worker is paid hourly or if they are a salaried employee. Then, we verify their pay frequency. Biweekly pay is by far the most popular among Earnin users and the U.S. workforce overall, with nearly two-thirds of Americans receiving their pay every two weeks.
DJ: What are the downsides of this, in terms of worker behaviors?
Claffey: In a recent Earnin wage analysis, we’ve found that the gap between paychecks is too wide for some Americans. Workers paid biweekly are 50 percent more likely to be living paycheck to paycheck than workers who are paid weekly. Those with shorter pay periods have more budgeting flexibility, despite lower average pay.
DJ: How easy is it for people to gain financial discipline?
Claffey: Financial discipline is a big challenge for many Americans, but it’s not because they lack the fortitude or desire. Every year in the US, $1 trillion in unpaid wages is held up in the two week pay cycle. The current financial system is set up in a way that is unbalanced, having a harder impact on those with limited resources. If you’re living paycheck to paycheck, the path is far from easy. Financial discipline starts with honest budgeting, then a plan to inoculate yourself from unexpected financial shocks. That’s where Earnin fits in for most.
DJ: What was the idea behind Earnin?
Claffey: In 2008, Earnin CEO Ram Palaniappan was heading up a different company when he heard one of his employees was struggling with overdraft fees and high interest payday lending products. The problem was not that the employee wasn’t paid fairly. The problem was that she needed money now — and payday was not due for another week. So Ram wrote her a personal check, which he deducted from her scheduled two-week pay. As word got out and more and more individuals (including people outside the company) started asking him for the same favor, Ram knew he had to build a product to help more people.
DJ: How did you develop the Earnin technology?
Claffey: Earnin uses a unique combination of technologies to understand how much people earn and when they’re working. When our customers wrap for the day, the app automatically calculates their pay based on hours worked and allows them to transfer money into their bank account — right from their smartphone.
Our new products are often influenced by feedback from our community. Our company is built around their support, so it’s important for us to offer the tools they need the most.
Lightning Speed is a great example of an Earnin Superpower. When we began, our customers received their pay through ACH transfers, which can take a few business days. That simply wasn’t fast enough, so we developed Lightning Speed, using a different set of financial pipelines to deposit money in their accounts so they had it in seconds rather than days.  
DJ: How does Earnin differ from other platforms?
Claffey: Earnin does not charge any fees. That includes interest fees or subscription fees, which can be as high as $6 a month on other platforms. Our community supports us by choosing what to tip us in return for our services. We’ve seen success with our tip model, which has worked well to keep us sustainable and change the dynamic, motivating us to work in the best interest of our users.
DJ: How does Earnin differ from payday loan companies?
Claffey: Earnin doesn’t offer loans, so we’re in a completely different category. We give you access to the verified income you’ve already earned with no fees. Payday loan companies, on the other hand, are often high-interest and tack on unforgiving fees. They are just a component of a financial system built in the interest of profit, and a reason why we're trying to create a better system.
DJ: What is the eligibility criteria?
Claffey: Anyone with a job and a bank account can use the Earnin app. A customer must receive direct deposit from an employer into a checking account, have a regular pay schedule and a fixed work location. That’s all. Earnin is used by workers at more than 50,000 companies including Apple, Starbucks and Home Depot.
DJ: What are costs involved with using Earnin?
Claffey: There are no mandatory costs or fees. Earners support the service by leaving tips.