Pay-On-Demand Pioneer Minu Offers Payroll Win-Win-Win
STORY INLINE POST
Q: What are the differences between and benefits of a payroll advance and pay-on-demand?
A: We are trying to reduce the number of people taking out loans. If you work for 13 days and you have an emergency or a bigger bill than you expected, you might need to take out a loan. We want people to know that if you need liquidity and you have already worked those days, there is no need to take out a loan. You can simply access what is already yours.
From the perspective of the employee, there are some important differences between taking a payroll advance and pay-on-demand but the most important is financial responsibility. When we access wages that we already earned, we associate it with our effort. With an advance, an employee might not relate it to any effort but if they are accessing pay from their five days of work, they will think more carefully about how they spend these funds. Understanding that your expenses are directly linked to the effort you put in leads to better financial decisions.
Our mission is to improve the financial health of millions of workers. We see that the financial life of employees is closely related to their banks and financial institutions but it is disconnected from their employers, which makes no sense. That is the transformation we want to see for a few reasons. First of all, not only is the employer your main source of income, but also your financial life is an important part of your wellness. There is an element of closeness and trust that an employer has with an employee that is stronger than with a bank, which is key. Then, there is a huge sense of alignment. Employers know that if their employees are financially healthier, they are going to be better employees. That is what makes employers offer benefits: to improve the financial life of their employees. They want to offer them better savings products, cheaper loans and more attractive rates. Pay-on-demand fits perfectly with those goals. It offers a better liquidity product than the market.
Q: Which digital financial tools can help boost the economic health of the general population?
A: We will be launching a new set of financial wellness products focused on short- and long-term financial needs, such as putting money into an emergency fund for the future to avoid taking out a loan. We also see a world of financial needs that are expected, such as rent. Then there are the unexpected needs, such as adverse events where insurance comes into play. We put a great deal of emphasis on promoting savings. The savings culture in Mexico is very low. Only 12 percent of Mexicans have a savings account. There are three reasons for this. One, there is a lack of motivation. We are working on products that will help people realize their dreams, such as traveling or buying a gift for a partner, through savings. Secondly, it is the mechanics. Saving is a pain when you have to put money aside from every paycheck or every month. We are automating that process. Thirdly, savings need to be economically attractive. We are offering a 6 percent return on deposits, which are fully liquid, meaning that you can withdraw at any second, in a market where most banks offer 0 percent.
We also offer financial education. We have a multilayer product that evaluates your financial education and lets you see where the gaps are. You can then get a customized program tailored to your needs. The program is broken down into modules that talk about various elements of finance, including expenses, how to use your credit card or how to save. These modules are 1-2-minute videos, using digestible language. We also use gamification to make learning fun.
Q: Minu recently went through a financing round with Crunchbase. What are your objectives in terms of expansion?
A: In 2021, we raised a total of US$20 million. The goal for these was to become the market leader for pay-on-demand in Mexico. We are 20 times bigger than the next competitor in the country and we are the biggest payer in Latin America, five times bigger than the next biggest payer, which is in Brazil. We have more than 100 clients in Mexico, including some of the biggest employers in the country.
We were the pioneers of pay-on-demand but it is now becoming a clear trend globally. One use of the funds we raised was to ensure our market leadership position and a second centered around product value profits. Our next set of products include savings, habits and insurance. We are also starting an expansion next year within Mexico’s economic centers, including Monterey, Guadalajara, Cancun and Tijuana.
Q: What changes do companies need to implement to use your platform?
A: The platform does not replace an existing system; we integrate it into payroll, which only takes a couple of weeks to complete. The integration also does not change the timing or the payroll process. When someone withdraws funds, those funds are deducted from their paychecks automatically. There is no administrative work for our clients. Secondly, we have a portal that provides a report to employers. They get to see the behavior of their employees around this financial product and create parameters. We build in buffers so employees do not have financial problems down the line. At Minu, we make payroll a win-win-win in which the company, employees and society win. We are working on an incentive where users are able to donate to social causes they feel strongly about.
Q: What is Minu doing in terms of achieving financial inclusion in Mexico?
A: A very big piece there is the world of unbanked versus banked. Then there is the fact that there is a very low penetration of products in the country, such as credit and savings. For us, helping people access products that they could not before is key. We also help bolster financial inclusion by making savings easy and attractive in terms of return and motivation. For folks who just started working, the fact that they start to get used to saving in small amounts plays a big role in financial inclusion.
Minu is revolutionizing the financial health of Mexican workers, offering them 24/7 access to their worked salary when they need it, rather than having to wait for payroll.