Early access to paychecks is popular with some consumers, but it's an amenity that only
The direct-to-consumer
Instead, customers are required to switch their direct deposit flow to Evolve Bank & Trust – EarnIn's sponsor bank partner which also provides its Tip Yourself savings product. The money is then rerouted to their existing bank accounts. Customers pay EarnIn $2.99 for the two-day advance on their paychecks.
"With Early Pay, what we do is we get the ACH file and we essentially switch it over to the faster rails so that the customer can get it wherever they bank up to two days early," Ram Palaniappan, CEO and founder of EarnIn, told American Banker.
"It's basically the [Federal Reserve] saying they're going to send this money on the post on date," he said. "Once we have that notification … then we initiate a push-to-card transaction."
The transaction is an instant credit with a deferred settlement, meaning that EarnIn doesn't have to put up any capital to offer the service. All of the card rails, including Visa, Mastercard, Interlink, Maestro and Star are supported, Palaniappan said.
Despite the fact that the product is designed to entice consumers who bank at financial institutions that don't offer early paycheck access, Palaniappan does not see Early Pay as competing with banks.
"If a bank already offers it to that particular customer and it works for them already, they don't need to get the service from us, [but] with some of the larger banks, it's not available to every customer, and through this, every customer can get it," he said.
The partnership with Evolve might cause some potential customers to pause, given its
Early paycheck access is becoming more commonplace with banks and fintechs as they look to compete for consumer deposits. Cash App, Chime, PayPal, Venmo and Wealthfront offer the service, while banks such as Ally, Capital One, Chase, Citizens, Fifth Third, Huntington, Regions Bank and Wells Fargo, among others, also offer two-day early access to payroll, according to Nerdwallet.
Banks have also used early payroll access to build on additional products and services.
EarnIn is also looking to fill a hole left by smaller banks and credit unions that haven't yet advanced their tech stacks to offer a similar service. And because the deposit is rerouted back to the customer's financial institution, the banks aren't losing deposit inflows.
"You do have solutions that are similar, but they require you to sort of port your entire banking over to a new institution," Palaniappan said. "You might have an auto loan, you might have a mortgage, you might have reasons why you don't want to switch your banking over. That doesn't mean that you can't get your paycheck two days early."
Some EarnIn customers are still choosing to use Early Pay over their own bank's product, though. Chicago resident and eight-year EarnIn customer Madeline Harrison, 38, told American Banker that although her bank, BMO, offers early pay, she prefers to have her paycheck be routed through EarnIn because it's more synchronous with her use of the app and its flagship earned wage access product.
"If you're borrowing, which is what I do, against future pay, it's all set up," Harrison said. "So they'll take [what was borrowed] out for you, and then you'll get whatever [pay] is left over in your paycheck. It's just that convenience of not having to worry or think about or do anything."
