Early February, I went to hear the Fintech Panel discuss about the FinTech Innovation in Underbanked/Under-served segment in a NY downtown meetup. In the backdrop of an office at work, we were discussing prepaid cards, companies and investments for the poor and so on. It was an enlightening evening on the future of the $89 Billion opportunity for innovation for underbanked/underserved consumers. And thats where I got a chance to hear and meet Arlyn Davich. Terrific energy, Great idea @PayPerks and Amazing execution. These are the traits that define her and PayPerks.
Pic: Arlyn is in the center in the 5 people Fintech & Underbanked/Unbanked panel
Here is a small story about how Arlyn Davich got the idea of starting PayPerks. Arlyn went to Columbia Business School and after passing out she came across the topic of Financial Inclusion on CFSI website. She started peeling the onion step by step and got to the Payroll cards and the Prepaid cards. And how the unbanked could benefit from prepaid cards. She got a lot of inspiration from CFSI and the research done at Harvard.
Davich had a background in business and marketing and Jake Peters (co-founder) in operations and technology. They started understanding the issues that surrounded prepaid cards and how to solve them. Thats when they thought of the idea of doing a customer education startup for lower income people…and in doing that, using the technology and a good business model also enable Issuers to get better at profitability.
PayPerks is reaching new heights. Founded in 2010 and headquartered in New York, the company provides a platform that enables users to earn PayPerks points that are automatically converted into a chance to win a cash prize through various actions. PayPerks was Named a best newcomer in payments at Harvard in Mar 2013.
They have shown demonstrable improvement in key metrics for the entities (Issuers of prepaid cards) they are engaging with. Some high points from the metrics they delivered at their Direct Express program:
- In April 2013, the U.S. Department of Treasury, in conjunction with its Direct Express prepaid card offering, launched a financial capability program through PayPerks
- Up until December 2013, more than 160,000 users have signed up and taken more than 1 million financial education modules online.
- These numbers underscore the tremendous potential of innovations in government payments to reach vulnerable populations and improve the financial well-being of families according to the treasury. Read more about it success in this whitepaper
Here is another success story from pilots done in the area of Payroll cards:
- The employers were Omni Hotels and Medical Staffing Network, and the setting included the program manager who operated both of the companies’ payroll card programs. Each company had a payroll card program that was about two years old, and both programs had come to a near standstill in new sign-ups. For already carded employees, use of the cards at the POS was not growing.
- The two pilot companies had a combined total of 8,000 unbanked and underbanked employees distributed across 150 pay locations throughout the country. With this population, PayPerks had an opportunity to test actual response and behavior to add to the research that had been done in lab settings.
- The pilot ran for 10 weeks during the spring of 2011. During that time, the number of cardholders doubled the total that had signed up in the prior two years that the payroll card had been available at these two companies. In fact, PayPerks reported that approximately 20 percent of that target group signed up for PayPerks accounts without any repetition of the message, a rate dramatically higher than the low-single-digit rates usually generated from direct marketing.
How Payperks Works?
- A visitor is required to enter his name, e-mail address, and a password.
- After entering those three pieces of information, the visitor is then a PayPerks “member.”
- Subsequent questions ask for the person’s language preference and employer name so that the member’s payroll card can be linked to the membership so that usage points can accrue.
- The new member immediately sees three things: the number of points available for the next sweepstakes, the number of days until the next sweepstakes and the maximum prize amount, and advice that additional entry points can be earned by taking more courses.
- After completing each module, participants are asked two questions. If a question is answered incorrectly, the member is given feedback explaining why the answer was wrong.
- A retest can be taken at any time. People are awarded points for completing modules, for correctly answering questions about what they learned from the modules, and for demonstrating behavior that was learned in the modules.
- Points are awarded for having pay loaded onto the card, for using the card to make.
- Anyone can create a PayPerks account, but those who do not have cards issued by or through a PayPerks partner will have a more limited site experience.
- Points can be earned for referring a friend to the PayPerks educational website, and for using the card at a gas pump (after completing the module explaining how to do that).
- Points can also be earned by participating in surveys designed to get demographic and attitudinal information (e.g., marital status, feelings about one’s finances) that allow for segmentation analysis.
- Points are entered into monthly cash drawings. With the aim of extending the winnings to many people, members are limited to only one prize per sweepstakes, and prize amounts are kept somewhat small.
- During the pilot, the top cash award level was $1,000 with additional prizes of $500, $50, and $10. Awards are delivered as a credit to the member’s prepaid card.
PayPerks team has been very busy over the last year. Their key goals include helping Issuers increase profitability and help Consumers know how to use prepaid products better. They are making use of the two most powerful tools known to mankind - Education and motivation. They are using technology and principles such as Gamificaton.
Pic: PayPerks team at work. The picture is shot at their offices in NYC.