[jon-wood]

> We thought employees would use our app because it’s innovative, but they mostly use it because they really need the money. This came as a surprise to us.

I'm having real difficulty working out how this could possibly have come as a surprise, of course people are using your pay advance app because they really need the money. Why else would someone take an advance on their pay?

[danielmarkbruce]

It's probably just the degree. This is a common thread - any payments company who has enabled an "instant pay" feature will tell you they were surprised how much it was used.

[asukhwani]

Good point. It would have been more accurate to state that we were surprised at how much people used the app! Over 40% of employees that have access to our app use it! Also, we were surprised by how high user retention is.

[antihero]

Most likely because people are desperate for money because they need to eat, and your app will create a snowballing effect where the next month, they are even more desperate because a chunk has been taken off their pay.

[wutbrodo]

This doesn't make much sense. The counterfactual is that they'd be desperate to eat and take out a sky-high APR short-term loan. How is the new ability to take zero-interest loans "creating" the snowballing effect instead of reducing an already-existing one?

This is called "the Copenhagen interpretation of ethics", in which any interaction with a situation in an attempt to improve it somehow gets warped into shouldering responsibility for the preexisting situation in its entirety. In this case, you've somehow transfigured substantially reducing the cost of credit into "creating global poverty".

[RhysU]

The payday loan puts backpressure on using it because it is obvious that the person is paying to use it.

A zero interest loan does not communicate to the user that they are reducing their optionality until they are stuck.

[wutbrodo]

This feels like quite a reach.

Understanding that you've received X pesos now and will receive X less in two weeks is a lot simpler than implicitly calculating the NPV/default risk of high-interest loans, both from an intuitive and an explicit budgetary perspective.

Even if we (incorrectly imo) assume this dynamic plays out the way you say it does, it's quite a bold claim to say that this putative psychological effect comes close to outweighing a 3000% (or w/e) reduction in APR.

[antihero]

Nope. It's not a reach. My personal experience with payday loans which, due to having a regular income, was that I paid them back (with high interest but not the crazy amounts people talk about from missed payments) on time. It wasn't the interest that got me, it was the lack of money. That you then had to deal with for the next month, meaning you were more likely to get another loan.

[RhysU]

No one needs to compute NPV anything. It's not that complicated.

All you have to do to get backpressure is to see that spending X pesos now means that you have less than X pesos in two weeks. Because, fees and interest.

[Grustaf]

Don’t you worry that easy access to credit will exacerbate the problem, leading people ever deeper in depth?

[asukhwani]

Our average user in Spain withdraws 50$, but their monthly salary is >1,000$. We also regularly survey users to see chat reasons they make withdrawals for.

Our conclusion is users are taking small portions of their salary to cover unexpected expenses.

Users tell us they love this, because otherwise they would have had to ask a friend for money.

[Grustaf]

In that case, wouldn’t the real solution to their plight be to learn to save money?

I know that is part of your offering, but your main product contradicts it completely, doesn’t it?

Easy borrowing does not seem to promote saving.

[asukhwani]

Indeed! That's why we released a second feature called "Saveflow". It allows employees to take a fraction of their payslip and put it into a virtual piggy bank. We just launched it but utilisation is great!

[imtringued]

>In that case, wouldn’t the real solution to their plight be to learn to save money?

That is not something you learn. You just sit in your house and wait for the paycheck to come in. I have never learned to save money. It just happens to me.