Branch’s Atif Siddiqi on how the largest brands use salary advance to attract and retain workers
- Branch is a popular app that is used by hourly workers to communicate and arrange shift changes.
- With Branch Pay, the app has moved into providing financial services for its userbase.
Hourly workers have specialized challenges and needs on the job. Shift management, communicating with one another, and getting paid are all issues tech company Branch addresses. CEO Atif Siddiqi joins us on the podcast to discuss how Branch evolved from being a messenger app into financial services, helping hourly works tap into their earned wages as they accrue them. With a focus on building an application that really targeted the hourly worker, Branch services workers at some of the largest employers in the US.
Monthly or bi-weekly pay cycles essentially amounts to a loan from a worker to their employer. That sits less well today and there is a lot of fintech activity around salary advance in the US, UK and other countries.
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The following excerpts were edited for clarity.
From messenger app to fintech
We started our journey with Branch by noticing that hourly workers didn't really have a lot of technology built for them. They had large, clunky enterprise software that would get low rates of adoption when rolled out across a company. We started with a simple premise to build technology for hourly workers that were desperate for solutions to make their work lives easier.
For example, they were downloading free apps like WhatsApp and would set up Facebook Groups to help them with the challenges around shift management and communication. We started getting critical mass at very large companies like Target, where we thought they would have figured this out. We honed in our product to service the needs of these large enterprises with tens of thousands of workers around hundreds and thousands of locations.
One of the insights we had, organically, was when we added in a wage tracker into our application. We gave hourly workers a way to predict how much they would make in a given week based on their rate and how many hours they worked. Employees loved the feature. Financial unpredictability is a big part of the everyday lives of these workers. One unexpected event like a flat tire or a doctors bill could derail their productivity at work and their personal lives. When we spoke to our users, something like 70 percent of them had borrowed money from a friend or family member over the past 90 days.
We have the data, their time and attendance. What if we could provide a portion of their paycheck in advance? And once they got paid, we could deduct it from their paycheck. That's how we came to the idea of Branch Pay -- the ability to provide instant payments for wages earned.
We did some testing and put up a waitlist. The waitlist spread to 35,000 to 40,000 people. Once we felt comfortable that the product was in a good place, we released people from the waitlist. Now it's open to any hourly worker in the U.S.
Companies address financial stress
Companies feel pressure in this tight labor market. Everyone is fighting over the same pool of people. Turnover is still around 100 percent in these industries. They are continuously churning these employees. So, companies are looking for benefits to make their employees' lives easier and to retain them.
In any given payroll cycle, we'll see 20 to 30 percent of employees use the pay option. People don't generally max out how much they can withdraw. It's $40, $50, $60 to meet an immediate need. It might be a bill but it's oftentimes for transportation to and from work.
Partnering to build a fintech app
For us, speed to market was a concern. We leveraged Plaid on the banking side. An employee could authorize their bank account through Plaid. When our users want to be paid, we didn't want them to have to wait a couple business days for an ACH transfer to receive their money. We use Cross River for the firm's push to card payments over the debit card rails. This allows us to transfer funds as quickly as a few seconds to any debit card. This was big from a usability standpoint to meet the needs of the end user.
We look for good DNA from partners -- how they view technology and engineering resources. We wanted to partner with firms where our people would feel comfortable with them personally and technically on the technology stack. That includes great documentation, getting up to speed, as well as any support issues that can pop up along the way.
Now, we're looking to layer on additional financial features and services to these employees. We're thinking about that upfront and what it may look like from an infrastructure standpoint. So many of these employees of large enterprises are unbanked or underbanked. They'll receive their paycheck on a payroll card and don't have a bank account. We're looking for ways to provide the employee with modern banking services.