How Even Built an App to Make Unstable Income a Thing of the Past
You know the story, right? You work your way through school, tending bar, waiting tables, folding T-shirts at the Gap, taking any number of odd jobs on the side. At that point in your life, income volatility is something you accept, because it’s just you coping with it. But what about if you’re older, if you have a family or other people depending on you? Having unpredictable income — where you have no idea what you may earn paycheck-to-paycheck — can make life’s ups and downs impossible to cope with. And unpredictable income flows are more common that you might think.
In fact, according to Federal Reserve data, one in every three U.S. households deals with substantial income volatility. And when it comes to payday loans – a $10 billion industry alone — 70 percent are taken out in order to pay for recurring expenses like rent and utility bills. “A lot of these people are getting a payday loan because of a low paycheck or negative income shock,” says Quinten Farmer, co-founder of FinTech startup Even.
Take, for example, the income volatility of a coffee shop barista. One week, she might work 45 hours and make $750, but another week, she gets the flu and can only work 15 hours. Suddenly her paycheck goes down to $250. Work fewer hours one week over the next and your income takes the brunt. What if people could find a way to spread out their uneven paychecks so that the amount of money in their bank account was more stable over time?
That’s exactly what the team at Even set out to do. In 2014, they began working to create a technology that lets businesses with hourly workers offer employees a way to better manage unpredictable income flows. Later that year, they launched the app Even, which works by making a basic calculation of what your weekly average income is over time. Even looks at paychecks over the course of four to six weeks in order to calculate what the app refers to as your “even pay.”
Here’s how it works: If you get a paycheck higher than your even pay, the app saves the extra income as a cushion it applies to a future period when your paycheck might be lower than usual. What’s more, Even will lend users money to reach their even pay, with the difference paid back once a higher paycheck comes in.
Even’s product development approach emphasizes direct contact with customers, in the form of prototyping and research. This emphasis was aided by the research resources available through Even’s work with CFSI, specifically with insights from the U.S. Financial Diaries, a joint initiative between CFSI and New York University.
Jane Leibrock, Research Lead at Even, says “The U.S. Financial Diaries was a godsend for me. Its insights were crucial foundational knowledge for our business, but a project of its scope would have been prohibitively time-consuming and costly for a startup of our size… As I worked, the opportunity to occasionally compare notes with that team was a great way to add confidence to some of my findings as well as to get ideas for additional topics to explore.”
To further help users do that, Even includes an in-house team of advisors available to chat in real-time. The app helps people fight poor spending habits by not putting them in the situation that might lead to such bad decisions in the first place. “You get a big paycheck and spend it all. In a perfect world where Even is working for you, you shouldn’t feel any different on that day,” says Farmer. “Software should be able to automate the things we are really bad at doing ourselves.”