NXT: What do you do?
We are an e-retailer that offers products through installment payment programs that are exclusive to our clients’ employees.
You may be surprised to know that up-to 50% of Americans are considered “credit challenged”, which means that they don’t have access to affordable financing. When they want to make a big-ticket purchase – like a TV, for example – they can’t afford to pay it outright and don’t have access to reasonable credit, so they turn to payday loans, title loans, rent-to-own or other high-cost alternatives.
We offer a unique solution to this problem. Working with employers, we give their employees access to much more affordable and reasonable payment options. They can buy through our website the brand name products they want via favorable and fully transparent installment plans.
We can do this because we set up payments through an automatic payroll deduction.
NXT: And what’s the value proposition to employers?
We effectively help employers offer a unique and highly-differentiated perk to their employees, which helps them with both recruiting and retention of great talent.
You know how most companies offer core benefits to their employees like medical and dental insurance…In an effort to differentiate from competitors, they turn to what are called “voluntary” benefits. They work with providers to get discounts or specialty benefits offered to their employee base. These can include supplemental life insurance, identity theft protection, pet insurance, etc. This is where we play.
NXT: How are you different than the competition?
A key aspect of our go-to-market strategy is that we’re committed to utilizing a payroll deduction feature in the way we transact with the employee. Competitors tried to reduce the complexity of the relationship by utilizing an ACH / bank debit process. But we’ve tested everything and found out that the direct payroll deduction is far superior. Payroll deduction is the key lever.
Also, I think Elon Musk said this a couple of weeks ago, “If you wanted to look at our competitors, you’d need a telescope to see who’s in second place.” Similarly, we’re by far the largest player in our field. And we’ve been around for 16 years, whereas most competitors are newcomers with only 1-2 years under their belt.
NXT: Why is your size and experience so important?
We’re working with large companies, where reputation & experience, and quality of processing, are critical.
Reputation & experience
Any time a new provider engages with an employer – especially in the Fortune 1000 – there’s a lot of risk from the perspective of the employer, so reputation and experience – the “being there tomorrow” factor – play a big role.
There’s a big risk to installing a benefit, putting a lot of time and effort connecting data & marketing, promoting it to employees…and then the vendor goes away, which is very embarrassing.
Quality of processing
When you are engaged in payroll activities, making mistakes cannot be tolerated. With our history and size, we have tremendous strength.
Our competitors are facing substantial process- and technology-related barriers to entry. It would take them lots of time and money to iterate through processes and develop the right technology.
Instead, we’re already battle-tested and can work with extremely complex implementations. Many employers don’t have standard payroll timing…they can have hundreds of different payroll calendars, a complexity that’s really hard to engineer for, unless you’ve done this a number of times.
NXT: How do you win over clients?
We work primarily through brokers of large HR Benefits programs, like Mercer, Aon, and Gallagher. These brokers have a large rolodex of clients and they bring a platform of benefits to them. A broker looks at our program as a unique benefit you won’t typically find at another employer.
We’re positioned as a voluntary benefit for our clients’ employees, something they can choose to participate with, but doesn’t cost anything for the employer to provide. A $50,000 per year paycheck looks the same from one company to the next, so many employers are increasingly looking to stand out among prospective employees through the breadth of their benefits package.
NXT: Sounds like a no-brainer… or is it still a difficult “sell” to employers?
Leveraging broker relationships gets our foot in the door but we still have to educate and convince employers of the necessity of a program like ours.
First of all, we’re still in the (relatively) early adoption phase of our program with most employers. We are marketing an innovative benefit that features a smart, but complicated implementation—so both employers and employees need a good amount of education. As part of the natural course of our product’s life cycle, we’re just beginning to hit our stride with market penetration and employee participation.
A second factor is that a lot of employers have just recently – coming out of the subprime mortgage meltdown – begun to recognize the financial frailty of their employee base. Many individuals live paycheck to paycheck, so if there’s ever a disruption – medical related, divorce, family need, a unique circumstance – they’re in a bad position to come up with immediate funds.
NXT: You’ve grown an already-sizeable operation by over 50% over the past few years… what are the keys to your success?
We have spectacular annual client retention of over 95% based upon customer demand for the program. This is critical because it creates a stable base of annual revenue, or re-occurring revenue. So we have a very strong starting point, and we build on top of that every year with the help of our strong broker network.
You can think of our client retention in a way that retailers think of same-store-sales (“SSS”) vs new store openings. Our SSS are always very strong and stable. Meanwhile, our brokers are helping us “open new stores” every year.
NXT: And what’s your growth opportunity looking forward?
The two pillars of our growth opportunity are: employer penetration and employee participation. We’re still at the very early innings of realizing the full potential of our opportunity.
We currently have about 5% penetration of potential clients (companies with >1,000 employees), so we have a lot of ground to cover.
Additionally, we have relatively low participation from their employee base compared to the 50% of them that are “credit challenged” and truly need this solution. Participation within an employer is highly correlated to the communications that we bring along with the program.
The simplest form to improve participation is through direct-mail and email outreach, where we present special offers or a new product launch or category – a “come now” type of message. We’re also doing Facebook Live events for special category launches and annual holiday campaigns. We are now using social media increasingly to address customer concerns and promote unique opportunities or deals.
Sometimes, we also have some “real estate” in the employer’s HR Benefits portal (a section where we can explain details of the program, spotlight a banner ad, etc.).
NXT: What are some general trends & dynamics in your market?
There are two major trends that HR departments are increasingly focused on, and where we can really help.
Millennials are driving HR leadership to be particularly innovative toward how they think about benefits. They’re moving away from the “one size fits all” paradigm and increasingly look for ways to personalize benefits. This creates opportunities for products like ours to get attention because employers want to be different and innovative.
Coming out of the subprime mortgage meltdown five years ago, you can’t pick up an HR publication today without reading a feature article on fintech companies, which speaks to financial wellness solutions.
The challenge for HR leadership is that they’re asked from the Board or senior team “what’s our financial wellness strategy?” For years, HR groups have focused on physical wellness but now it’s time to focus on financial wellness, too.
We have a ripe opportunity to help companies promote financial wellness as a key benefit of their Benefits platform. Our program helps employees better manage their finances — The price they see at check-out is the price they pay, so there are never any surprises. We help them budget their purchases, and relieve any stress associated with payment due dates, recurring interest or late fees.
This is important because, when employees are struggling with financial stress, it pulls productivity out of the workforce.