Sobering numbers tell the story of the problem Birmingham startup Immediate is looking to alleviate – 46 percent of Americans have less than $400 in savings, and 78 percent live paycheck to paycheck. Because of this, there is $1 trillion in credit card debt in the U.S. and often biweekly pay periods for workers, leading to a dependence on alternative lending sources like payday loans which create cycles of debt.
Immediate, a startup recently recruited to Birmingham through the Birmingham Bound tech initiative, works to make paychecks available early for hourly workers and could help change that narrative.
And just six months after launching in Birmingham it has landed its first big customer, Physicians Group Management, a medical billing services company based in Elmhurst, New Jersey with 105 employees.
The company currently has five employees but anticipates tripling that by the end of 2020, said Matt Pierce, cofounder and CEO of the company. Pierce, who has both a finance degree and an MBA from Auburn and has a background in health care technology, attributes a lot of his success to Birmingham and the entrepreneurial resources found here.
“The kind of access to people and opportunities our company would get versus Atlanta made it a no brainer for us to headquarter our business here,” said Pierce.
Immediate’s financial health platform, ImmediatePay, allows hourly workers to access their earned wages early. It costs nothing for employers to take part, and the only requirement for employers to become a customer is that they have hourly employees. Workers looking to access their money early pay a $3 flat rate to pull their wages in advance of their paycheck, and they cannot get early access to more than 50 percent of their wages.
Immediate works by integrating with employers’ human resources software, which notifies ImmediatePay of hours worked by employees and makes the earned but unpaid wages available for the employee to transfer wherever they would like them to – a checking account, a savings account or a debit card, for example. It’s all part of an effort to combat credit card debt and predatory lending practices like payday loans, which can accrue up to 2.25 percent interest daily, said Pierce.
“It’s really sad,” he said. “Eighty percent of payday loans turn into a second payday loan. The average payday loan costs the user 36 percent. If you have a $500 principal, you pay $180 in fees. That’s the alternative to using us.”
There are no percentages and no paybacks as it’s not a loan, Pierce said.
“It’s their money,” he said. “We’re just making their money available to them.”
Immediate will be fully integrated with its customer Physicians Management Group by mid-August.
“When Matt approached me with Immediate several months ago, I thought ‘Wow, this is an amazing idea, and I can’t believe in 2019 this is the first time we’re hearing about something like this,’” said Chris Saviano, vice president of business development at PGM. “It’s a layup for us. It’s at a low cost to employers, has a huge upside of employee retention and is a great benefit to employees as well, letting them draw down on the money they earn when they earn it. There’s no downside.”
Immediate has future plans to offer a budgeting tool and a podcast with three- to five-minute snippets that teach financial literacy to customers, even offering $1 off customers’ next early access pay if they listen.
“We are a financial health platform to get people on track, to make good decisions,” Pierce said. “We aren’t predatory like others.”
This platform has the potential to have an immense impact, reaching far beyond Birmingham to help millions, Pierce said.
“There is a great deal of social impact we can have here,” he said. “Can we help with budgeting? Financial literacy? There is an altruistic aspect to it, and it excites us to be able to blend those two. We believe this will be a platform to improve the financial health of millions of Americans.”