Financial technologies like digital wallets and crypto-currencies are supposed to be changing how we spend money. And others are aiming to change how we save. The business plan of a new company called Even is to have hourly workers loan their incomes to the start-up plus pay a weekly fee of $5 in exchange for being paid the money back as a consistent salary. It’s a banking start-up for our precarious times.
It’s often said that we’re living in the ascendancy of the “1099 economy,” a job market made up of part-time employees eking out work wherever they can find it, particularly under the aegis of decentralized service-providing companies like Uber and Homejoy. The number of independent workers in the United States, including temporary, on-call, and contract employees, rose to 17.7 million in 2013, up from 16 million two years before, according to Harvard Business Review. Some estimates predict this statistic will grow six percent annually over the next five years.
The perception of what a job should be is also changing. Hence the desirability of a business like Even, catering to what has been called the “precariat,” the social class of temporary workers whose economic lives are constantly in danger of falling apart. Even provides a measure of stability—with budgeting and money-saving help—to those who are usually forced to find it on their own.
The gap between a paycheck and rent being due pushes many to predatory payday loans. Even is trying to fix that problem with its small-loan service, but it’s unclear how the interest-free loans will be supported.
Even will pay out a regular amount of money based on the hourly- or contract-based wages someone like a Starbucks barista earns, then bank the excess if they earn more and extend interest-free loans and emergency payments should they fall short. It’s a one-stop money manager for freelancers. The problem remains, however: The service shouldn’t have to exist in the first place.
Quinten Farmer is a co-founder of Even, as well as a former dishwasher, landscaper, and developer. “I was experiencing this problem of, the restaurant closes down early a couple nights, all of a sudden I’m getting a bad paycheck and rent’s a little tight,” he says. “We felt like we needed to tackle that problem.”
After determining a user’s average weekly income based on a six-month sliding scale, “Even is going to deposit that number to you every Friday, then when the paycheck does get deposited, we will remove that from your account,” Farmer says.
The central bank account where Even holds its users’ capital is the equivalent of a checking account, so neither the company nor the clients will earn interest on inactive funds. “We have no interest in making money off of the floats,” Farmer says.
“The bigger theme is that so many people get into debt through really simple timing mismatches,” Farmer says. The gap between a paycheck and rent being due pushes many to predatory payday loans. Even is trying to fix that problem with its small-loan service, but it’s unclear how the interest-free loans will be supported save the company’s excess holdings or its venture capital (it has raised $1.5 million). Clients will have to be maintained in a strictly low level of debt for the service to survive on a large scale.
Even’s weekly payments aren’t quite as stable as they first appear, or as marketing might suggest. “If someone adds a second job or hours get cut permanently, goes to school, or is not working Fridays anymore, that’s a point where we’ll inform the users based on this new info that your [salary] number’s going to change,” Farmer says. “We have to figure out how much warning is going to be ideal for them.”
The service provides the illusion of added stability over the fundamental experience of being unsalaried, but unlike an actual salary, Even’s payments will still be variable. Still, there’s some peace of mind benefits. “We talk a lot about removing the mental overhead of people’s money management,” Farmer says.
Even is currently in a closed beta as the first clients test out the system and Farmer’s team modifies it accordingly. The product certainly fulfills a need that our country has created for itself. It’s paranoiac technology for a time of justifiable economic paranoia. But useful as it might sound, I wish we didn’t need the start-up.
It would be great to see Even’s functionality built in to the services of large banks—perhaps an acquisition in the company’s future would make this happen—or even incorporated into the central government. After all, the company is essentially levying weekly taxes in exchange for security, the role one hopes our national financial infrastructure would play—however often it fails at the task—or our employers, which lately have appeared less willing to take on the burden of full-time employees.
Rather than fixing the cause of our insecurity Even is providing a temporary solution and hoping to profit from it, whether through its own fees or a future acquisition. That shouldn’t be the most we can hope for from our tech start-ups.