The Next Trillion Dollar Opportunity for Startup Capture
What’s the first, real-world, lesson taught in any business centric class
- fix a problem (opportunity) that someone is willing to pay for. Now,
identifying the problem or equally important finding a solution that has
differentiated value, is usually not easily surmountable. The reason for
this quick level set is to talk about a potentially Trillion dollar
opportunity.
Problem statement:
In the US, there are more
payday loan providers than McDonalds. Good for payday loan providers, but bad for people.
A survey report has reported that 42% of full-time workers are unable
to meet their monthly obligations of household expenses. This state of affairs is tied to antiquated ways how employees get paid
at a pre-defined cadence, say bi-weekly. According to EY estimates,
almost a trillion dollars is tied up in payroll systems and 70% of
global workers are paid either bi-weekly or paid monthly.
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An opportunity on the horizon?
EY estimates an employee turnover of 20%, related to financial stress. A
study by Harris poll has found that
80% of the workers in the US would like to get money in their
accounts as earned. Furthermore, it was also identified that with Gen-Z becoming the
largest group by 2026, immediate access to capital, as part of earned
wages, will become a key differentiator to stay with a firm.
Whilst most large firms may or may not be aware of this, several
On-Demand pay apps are starting to address this gap.
On-Demand Pay in Motion:
Even, FlexWage, PayActiv, Instant Financial are some of the on-demand pay
apps available that are addressing the
need for On-Demand.
Walmart’s 20% workforce is leveraging the Even app, to avoid payday loans. Walmart covers the cost of using the app for both hourly and salaried workers. Employees can access wages early, up to eight times per year for free. After that, they pay $3 per pay period to cover transaction fees and for features that help to set savings goals and create a budget. Whilst this is not On-Demand pay, it’s a step in the right direction.
Sprinkle Cupcakes is partnering with ADP, who in turn is leveraging the DailyPay app to pay employees as they complete a shift. Employees gain access to their pay as early as 3 a.m. the next day.
For budding entrepreneurs, the pandemic, coupled with the great
resignation, Instant or On-Demand pay provides a great avenue to launch
your next startup.
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