Employer-Led Financial Services: The Role of Digital Banking in the Workplace

After more than a year of work and financial uncertainty driven by the pandemic, COVID-19 has illustrated how truly intertwined workplaces and workers’ financial personal finances are. It’s given rise to employer-led financial services and programs, which have become increasingly important benefits companies offer to attract and retain workers. As the fight for talent grows, leading employers are turning to digital banking, financial wellness, and other engaging tools that can boost workforce financial health, productivity, and retention. Hear from fintech Branch, Evolve Bank & Trust, and Domino’s about this growing trend and best practices from real experiences that have not only helped provide greater financial stability for workers but also a new push to modernize workforce payments.

Transcription:

00:00:11:22 - 00:00:43:18
Michael Moser

Welcome to the program. I'm Michael Moser. I'm the moderator. I'm joined by Atif Siddiqi from Branch and by Keith Mango from New River Valley Pizza, a Domino's franchisee, and Kristen Kines from Evolve Bank & Trust. So you're in the session: “Employer-Led Financial Services: The Role of Digital Banking in the Workplace.” I want to start off by saying there's some polling questions on API sponsored by Plaid.

00:00:44:06 - 00:01:12:21
Michael Moser

You can click the link above the description to access the polling questions. So after more than a year of working and financial uncertainty driven by the pandemic, COVID-19 has really illustrated how truly intertwined workplaces and workers’ financial personal finances are connected. It's given rise to employer-led financial services and programs such as earned wage access. Or you'll probably hear that term quite a bit today.

00:01:13:25 - 00:01:40:11
Michael Moser

The important thing is that as the fight for talent grows, leading employers are turning to digital banking, financial wellness and other engaging tools that can boost workforce, financial health, productivity and retention. And so I'd like to start off and turn the microphone, the virtual microphone, to Atif. So how has the pandemic changed personal finances for hourly workers?

00:01:41:13 - 00:02:03:22
Atif Siddiqi

Yeah, I think, you know, one of the things that pandemic was really highlighted, just the amount of income volatility that, you know, exists in these workers’ lives. You know, when you think about it, even before the pandemic, many struggle kind of paycheck to paycheck and little or no access to credit, very little savings. And, you know, you have the pandemic on top of that.

00:02:03:22 - 00:02:29:12
Atif Siddiqi

And now they're dealing with maybe a loss of hours at their job, maybe a loss of job in the household. And so really, you know, helping them kind of improve their cash flow and improve their budgeting was really exacerbated by the pandemic. And so, you know, Branch, one of the things we do is to really empower working Americans. We've always felt like you have to improve their cash flow and get cash into their hands as soon as possible.

00:02:29:12 - 00:02:38:03
Atif Siddiqi

So they're not in crises elsewhere. Hopefully today you'll learn about how we did that with Keith here at Domino's Pizza.

00:02:38:03 - 00:03:15:23
Michael Moser

You guys have hired thousands of workers or Domino's itself and you as a franchisee have about 17, 18 stores. Typically you'd expect a guy from Domino's to talk about the price of pepperoni or something like that, but not about the finances of the people that work for you.

00:03:15:23 - 00:03:25:24
Michael Moser

So how has that sort of come? Has it sort of bubbled to the top?

00:03:26:21 - 00:03:52:23
Keith Mungo

With the advent of the pandemic, a lot of things came to light and became more urgent as our business levels increased as our debt, unlike a lot of other restaurants, delivery is busier because of the pandemic. So we knew we needed to increase staff. We needed to do it quickly. And finances were a big thing for a lot of those people.

00:03:52:23 - 00:04:15:13
Keith Mungo

They had been laid off from other jobs. They had chosen to leave other jobs and come to this one. And there's always that [inaudible] in the middle where you don't get paid from the other job, yet you're maybe two weeks out from getting paid at this job. And it can be tricky. A delivery driver, of course, gets to make money daily, but I've got to get that money into their hands.

00:04:16:13 - 00:04:37:24
Keith Mungo

And Branch helps us do that because we didn't have enough cash in the store. All. All of our customers went to credit cards. They didn't want to handle cash. Our people didn't want to handle cash. So we had no cash to pay them. So we started paying them with Branch. And it was a relatively easy rollout. It was quick.

00:04:37:24 - 00:04:44:09
Keith Mungo

It was efficient. And our people got paid every morning for the work that they did the night before.

00:04:45:04 - 00:05:09:13
Michael Moser

Talk to us about the whole point of cash. You mentioned earlier in our pre-conversation in terms of a store typically had, I think, hundreds of dollars in cash and ones and fives. And talk to me about the struggles that that sort of pushed on to a franchisee such as yourself.

00:05:10:17 - 00:05:27:09
Keith Mungo

Our stores carry very little cash to start the day. Typically $500 is our opening amount of money. And then in years past we counted on customers paying us in cash and then we pay out our drivers and cash in tips every day.

00:05:29:24 - 00:05:56:08
Keith Mungo

All of that cash is you know we start with fives and ones and change. We ended up in a position where $500 wasn't enough. So we were having to run to the bank every day and write a check. … So we have supervisors running to banks and getting $5,000 and going off visiting five stores so that they have money to pay out the drivers.

00:05:56:08 - 00:06:23:06
Keith Mungo

At the end of the day, Initially, we thought that there was going to be a good amount of pushback going to Branch because I'm not getting cold, hard cash in my hands every night. And we thought that our people would not like it. That's because we're old and they're not. And they were absolutely fine with getting paid on an app and not getting cash or getting paid into a card that they can use at the grocery store.

00:06:24:24 - 00:06:44:21
Keith Mungo

One of the things that our drivers specifically thought was going to be a problem was not getting that cash. And they said: “No, no, it's really good. I have to go to the bank. Three or four times a week and deposit, you know, $500 in ones and fives because I have no you know, I have no use for all that cash.”

00:06:44:21 - 00:06:51:22
Keith Mungo

“I can't put it in my wallet and I don't want it to sit around in my bedroom. So I have to go to the bank” and this alleviates that problem for them.

00:06:52:19 - 00:07:04:00
Michael Moser

Kristen, talk to us about how this works from a financial institution perspective, because you guys are the bank behind Branch.

00:07:04:25 - 00:07:29:12
Kristen Kines

Evolve Bank & Trust operates in the space and a couple of different fashions. We're a sponsor bank for both acquiring transactions as well as issuing transactions. And then we also have a retail banking stack of APIs on the back end here. So it's real simple; Branch is a direct platform to the bank.

00:07:30:00 - 00:08:01:03
Kristen Kines

So Branch would provide the user experience, the user interface would interact with the actual end users. And when I say end users, that would be Domino’s and the Domino’s employees would be the end users for. So Evolve’s role behind the scenes would be sponsoring into the card networks: for the Domino’s users to be able to access their cash via the Branch Mastercard, for instance.

00:08:02:12 - 00:08:13:21
Kristen Kines

The bank would also provide a different payment rails under the hood to help facilitate the payments. That makes sense.

00:08:15:04 - 00:08:40:23
Michael Moser

Yeah, that definitely does, a lot. Talk to us about how if Keith gives you a phone call on a Monday, you know, we've got this issue. We want to, you know, solve our cash issue. We want to help workers get access to their pay earlier. How long? What's involved in terms of getting somebody set up on the Branch app?

00:08:41:01 - 00:08:48:12
Michael Moser

What does it take? What's the involvement? How much heavy lifting does a guy like Keith have to do?

00:08:48:12 - 00:09:00:00
Kristen Kines

About when it comes to actually onboarding, the employees at TIFF might actually be better suited to walk through what that looks like from their perspective.

00:09:00:08 - 00:09:23:17
Atif Siddiqi

Definitely. And there was a series of new innovations, actually. We created Branch to facilitate that. … I think the big thing for us was, do we have reliable data around the tips? And so we had built an integration into the point-of- sale system where we can gather someone's payment on a credit card and they write the tip information down or they're making a mobile order.

00:09:23:23 - 00:09:42:05
Atif Siddiqi

We get that data in real time. And yeah, it was paramount for us to make sure that the drivers had their cash as soon as they were finished with the shift and as soon as they finished a delivery. Because, for the most part, all these drivers, the reason they're working these jobs is so they can get cash in hand as soon as they're done.

00:09:43:10 - 00:10:12:10
Atif Siddiqi

So once we have the data, you know, all the money flows to our digital wallet and the great thing about the wallet is that we can push money any time, day or night. Weekends included. And that's been a great way for us to get money as fast as possible to drivers. The big thing that these drivers want is they don't want to have to go into an app and order a car and wait seven to 10 days.

00:10:12:10 - 00:10:34:16
Atif Siddiqi

And so what we did was launch a way to have instant cards, meaning that these were on personalized cards … at the employee breakroom or an account or somewhere, and a physical-location worker can pick up that card, activate it, and immediately they have their cash on hand on that card. They can go use included if they want to go get cash.

00:10:34:16 - 00:11:03:06
Atif Siddiqi

There's over 50,000 free ATMs that they can go to on the operating network, but they cannot take it out. And so that flexibility, that speed, ease of use was really big from a user-experience standpoint.

00:11:03:06 - 00:11:08:01
Michael Moser

What's been the adoption among your workers?

00:11:08:20 - 00:11:38:09
Keith Mungo

When we first started again, we thought we were going to have a problem, but we had about 80% buy-in right from the beginning. About 80% of our employees were right on board. They signed up with the temporary parts Atif was just telling you about. It was smooth. It was easy. I'm not saying that some of them weren't tech challenged and they needed a little help from their neighbor, but usually someone could lean over their shoulder.

00:11:38:11 - 00:12:03:15
Keith Mungo

So that all went well. But the 20%, some of them are older, some of them are diehards. Some of them literally don't have a smartphone. And so there were challenges. And for those 20%, we literally went to each location and met with those people, explained why this was better for them. They understood it in the long run.

00:12:03:15 - 00:12:21:00
Keith Mungo

And most of our employees actually have direct deposit directly to the branch as well. So all their money now comes, they're in one spot. So to me that tells me you trust that you like it and that's how you want to do your business.

00:12:21:00 - 00:12:34:15
Michael Moser

Talk to us about how, as we think about companies like Domino's or gig-economy-type companies, how does this really impact the financial service that you are?

00:12:34:27 - 00:13:08:07
Kristen Kines

Certainly. So, you know, I would say we do a ton of store value ecosystem type work. We're constantly coming up with ways to get money into the ecosystem, to figure out different ways to be able to get it back out again, so that these consumers can actually access the capital that's held with them. But then these accounts, what I'd say is the pandemic in the market over the last really last year or two years, I just see the need for this stuff really kind of expanding and really just booming.

00:13:08:16 - 00:13:33:06
Kristen Kines

You know, everybody is looking for faster payments. Everybody is looking for a solution for more immediate payments. What can we do to start facilitating access to capital, real time? All of those things are at the forefront of the market. And I don't I don't see it slowing down anytime soon. So, exciting time to be banking.

00:13:33:20 - 00:13:54:13
Michael Moser

Just before the pandemic, you guys were already rocking and rolling. And then Keith talked about how, immediately they had 80% adoption. What is it about getting access to your money faster? How does that really resonate? I mean, we all have bills and it seems to make sense.

00:13:54:13 - 00:13:58:25
Michael Moser

But why does it resonate more so with hourly workers?

00:13:59:28 - 00:14:21:28
Atif Siddiqi

If you look at the demographic of hourly workers, most have some degree of income volatility. Their income fluctuates. Oftentimes what we've seen to it's little or no savings, little or no access to credit. One expense at their kid's school really derails their financial lives.

00:14:21:28 - 00:14:40:06
Atif Siddiqi

Makes it hard to kind of plan. And so ultimately, what we figured out, if you really want to go back to our mission, which is to help working Americans grow financially, the best way you can do that short term is just improve their cash-flow rate and get the money that they've already earned into their hands faster.

00:14:40:11 - 00:15:02:03
Atif Siddiqi

So they can deal with some of those shocks and volatility and really slow that out and be less financially stressed. And so they're productive at work and they're not having to worry so much about their finances.

00:15:02:03 - 00:15:25:04
Atif Siddiqi

And we did the cashless tips and now more recently look at other industries where that would be very valuable, where workers have to wait for money. Most recently we launched with Uber freight and truck drivers. They have to wait 30 to 60 days sometimes. And these are independent business owners that are starting their own businesses and they want to get back on the road.

00:15:25:04 - 00:15:30:04
Atif Siddiqi

They have a high degree of expenses. And so we're accelerating that payment cycle as well.

00:15:31:23 - 00:15:51:08
Michael Moser

Kristen, what attracted you to partnering with Branch?

00:15:51:29 - 00:16:11:09
Kristen Kines

Well, this is the direction the bank is really kind of moving in. One of the primary focuses of the bank right now is within our open banking division. We got into the space several years ago; I think we partnered with Branch three years ago.

00:16:12:06 - 00:16:30:18
Kristen Kines

This has been a fantastic relationship that we're super-bullish about and really look forward to launching new products and services with them along the way. But part of getting into this space several years ago, we really kind of looked at the forefront of the industry and just thought this is the direction everything is moving: digital.

00:16:31:00 - 00:16:51:09
Kristen Kines

You know, when you're looking at the younger generation, everybody's picking up their phones, downloading a new app. They're looking for faster ways to do things, and it just seems like the younger generation isn't walking into a physical bank branch anymore. So how can we better facilitate that? How can we get ahead of the curve and be a player in a game several years down the road?

00:16:51:23 - 00:17:21:25
Kristen Kines

So our open banking division here is a large, large primary focus of the bank. So super-excited to expand the new innovative ways that we can approach the market. What different facilities can we start employing to be able to develop faster payments, more real-time payments, and more options for companies to be able to launch products to support the gig economy and support brands that are out there in the market today?

00:17:22:10 - 00:17:41:03
Atif Siddiqi

[Inaudible]

00:17:41:03 - 00:17:57:17
Atif Siddiqi

As you know, a quick-service restaurants, you have a high degree of the employee population that might be under 18. And so we've been able now to bank, you know, a 16-year-old at McDonald's; that's their first job. So they're not having to run to a Kroger Walmart to go cash a check and spend $10.

00:17:57:28 - 00:18:10:03
Kristen Kines

And think about the cost savings that you're really employing with a lot of these employers as well by eliminating the paper checks. But I think you can probably speak to that very well.

00:18:10:17 - 00:18:34:23
Atif Siddiqi

There's a cost saving element, every time. And there's also an administrative burden here. You have a payroll administrator who's cutting checks, then having to go deliver those checks. So as Kristen mentioned, we see populations embracing it. It's accelerating digital solutions.

00:18:34:23 - 00:18:36:24
Atif Siddiqi

So that really resonates with the end user.

00:18:37:19 - 00:18:42:28
Michael Moser

So Keith, you guys are driving around cash?

00:18:43:13 - 00:18:52:06
Keith Mungo

We are not. We do not need to.

00:18:53:18 - 00:19:05:29
Michael Moser

If you were to go back and think about when you implemented it, what would you have done differently?

00:19:06:22 - 00:19:29:12
Keith Mungo

I think the only thing we would have done differently was educate a little more on the front side. We would have had a crew meeting in each store. We would have talked more about what the benefits are and explained that a little bit more. Rather than throw up a poster and talk to the general managers and make sure that they talk to their people.

00:19:29:12 - 00:19:39:14
Keith Mungo

The message didn't get all the way down as well as it could have. We would have had a higher adoption rate, faster, had we done that well.

00:19:39:19 - 00:20:06:23
Michael Moser

80% right off the bat sounds pretty impressive. And I know you guys are always focused on time and quality of product, but 80% certainly sounds pretty amazing right off the bat. Is this typical of when you guys go into a client and all of a sudden you've got a boom? Eighty percent, I mean. Is it self-explanatory?

00:20:06:23 - 00:20:07:27
Michael Moser

What's the secret here?

00:20:08:08 - 00:20:31:06
Atif Siddiqi

Yeah, I think it's becoming easier as we do this right. And ultimately, though, we've seen a lot of success based on the engagement and as Keith mentioned, education on the partners we work with. And so really, you know, being able to explain to employees, having great communication sharing is and a good partner that educating their employees really goes a long way.

00:20:31:06 - 00:20:53:13
Atif Siddiqi

I do think that this idea of a digital solution where you can get your money faster is becoming more commonplace. Right. Started with maybe the Ubers of the world.

00:20:53:13 - 00:21:20:06
Atif Siddiqi

Now it's coming into more W-2 employee markets. And we definitely see an acceleration here among employers where they're looking to solutions like Branch as way to attract and retain talent. That's still a big driving value for the employer. It's like, hey, actually, workers are asking about this. And we know that it's becoming a competitive, compelling benefit to offer our employees in a suite of financial benefits.

00:21:20:28 - 00:21:30:22
Michael Moser

Kristen, talk to us about how I guess the overall role of the employer in financial services, if you will, because that's typically not what you think about.

00:21:31:11 - 00:21:58:10
Kristen Kines

Well, no, in our role at the bank, our clients are the platforms. The Branches of the world, the PayPals.

00:21:58:21 - 00:22:07:26
Kristen Kines

I think that there's massive amounts of opportunity out in the market. I don't think there's any shortage of business out there.

00:22:08:11 - 00:22:32:00
Atif Siddiqi

Let me touch on that a little bit more. On the role the employer plays with financial services. Usually, the employer plays a really significant starting point, of educating consumers on different financial service options. And for the longest time, when we think about employer-led financial services, it's more catered towards maybe higher-income individuals.

00:22:32:00 - 00:22:53:12
Atif Siddiqi

For the hourly worker, maybe someone that skews more to low to moderate income, there's not a lot of options available. And so Branch kind of fills that gap, if you will, for financial services that employers can offer that really make a huge benefit to them in their daily lives.

00:22:54:05 - 00:23:04:20
Michael Moser

Now, just so I'm clear, the money is extreme that Keith and his group are cashing out. These are earned wages. These are not loans, right?

00:23:05:00 - 00:23:06:15
Kristen Kines

That's correct.

00:23:06:26 - 00:23:15:26
Atif Siddiqi

That's correct. Just like you would receive a cash tip at the end of a delivery. It's now just digital. We get the bits and we were able to push that to our wallets.

00:23:17:07 - 00:23:40:12
Michael Moser

What does that mean, Keith, in terms of your ability to attract and retain people?

00:23:41:02 - 00:24:06:12
Keith Mungo

It really means that it's smooth and easy to work. Here is something that they don't have to worry about. It's something that just happens automatically in the background. I was actually shocked at the number of people that do not have a checking account.

00:24:07:00 - 00:24:07:08
Kristen Kines

Yeah.

00:24:07:15 - 00:24:30:06
Keith Mungo

That worked for us. I mean, their delivery drivers, some of them are people that work inside of our stores and they don't have a checking account. They don't want a checking account. According to them, they don't need a checking account. And in those cases, they didn't have a debit card. They couldn't buy something on Amazon. Their life is now different.

00:24:31:08 - 00:24:37:15
Keith Mungo

And I beg to say that it's for the better. So it makes it a little easier for everyone.

00:24:37:26 - 00:24:53:09
Michael Moser

Amazing. I shop on Amazon all the time. So for me, it's sort of hard to understand. Is this typical, where you go into a client and you've got this legion of unbanked people?

00:24:53:27 - 00:25:09:10
Atif Siddiqi

Definitely. And we say, yeah, you'd be surprised, you know, kind of like you're on the outside, but you're going to be going to stores … and other industries. We find that, like, 20%, 30% just don't have checking accounts. A big part of our strategy is we have the ability now to educate the user.

00:25:09:10 - 00:25:31:06
Atif Siddiqi

Maybe they're receiving their tips faster or their earned wages faster. It's core banking and … it's a free banking service, free checking account, free ATMs, and what we find is deposits are increasing over time once we're working with customers, and that's great, right?

00:25:31:06 - 00:25:50:02
Atif Siddiqi

Because ultimately a branch, we have a free solution, right? And we make money as account balances grow and they spend on the card. And so it's been a great way really to align our interests or the interest of the user. And as they grow and they hopefully build balances, we grow with them.

00:25:51:03 - 00:26:04:05
Michael Moser

Does this create an opportunity for you and Kristen, as you look at Keith's employees, to maybe create a savings account?

00:26:04:16 - 00:26:34:09
Kristen Kines

So there's always opportunities to build out new ways to help facilitate new products to the marketplace.

00:26:34:09 - 00:26:58:11
Kristen Kines

Keith was mentioning all of this segment of the population that doesn't have a checking account. You think about all these other scenarios in these different verticals where all these neobanks and challenger banks are coming to the forefront of the market to be able to provide solutions for immigrants coming into the United States that can't go into a bank branch and set up a normal banking account you know, how are they going to get access to funds?

00:26:58:11 - 00:27:25:15
Kristen Kines

How are they going to receive direct deposits and paychecks? You know, how are they going to spend down balances and stuff? They are constantly working through new verticals, trying to solve a lot of these issues. Another thing that we're seeing a lot at the forefront of the market is how can you start improving better credit scores and how can we turn around and help employees start improving their credit?

00:27:25:15 - 00:27:29:20
Kristen Kines

So to open up new, new avenues and new opportunities for these guys.

00:27:30:06 - 00:27:40:01
Michael Moser

There's a question from the audience for Keith. What does Domino's do with all the extra cash? Does Domino's need to make more cash deposits through the bank branch?

00:27:41:21 - 00:28:12:15
Keith Mungo

So as a general rule, the answer is no. We typically make one deposit a day. We just don't bring in cash. Welcome to 2021, where we have, you know, in some cases over 90% of all orders are electronically funded by Domino's. You can pay with PayPal, you can pay with a credit card, debit card, whatever. And we just don't see the level of cash that we did four years ago.

00:28:12:15 - 00:28:17:22
Keith Mungo

Five years ago, it's still just one deposit to the bank.

00:28:18:13 - 00:28:36:08
Michael Moser

So another question. If someone only uses Branch as their main bank, do they have an option to deposit somewhere else, hold on through other checks?

00:28:36:22 - 00:28:57:05
Kristen Kines

We do have a solution for that. And it's a remote deposit capture. So the way that that would work as one of our products and services is a platform such as a branch could take our case, drop it with an embedded within our app. What it looks like to the end user is the end user is able to actually take a picture at the end user.

00:28:57:05 - 00:29:04:14
Kristen Kines

The consumer is actually able to take a picture of that check and it's automatically deposited into their account yeah.

00:29:04:24 - 00:29:38:00
Atif Siddiqi

One of the things we see as well is someone starts using Branch like at a Domino's, they're working another job or receiving income elsewhere. They're adding their direct deposit from those locations to their Branch account. And one of the things we've been able to do … is just offer that two to up to two days early, meaning that once we see the effective date … come through, we're able to post it directly to their account and that's kind of, you know, again, a big point of just getting money to employees faster.

00:29:38:14 - 00:30:05:04
Michael Moser

I want to start our close here as we're ending the session. I want to thank Kristen Keith and just for participating in today's session again to the audience. They're pulling questions on API sponsored by cloud that you can take. And our next session will be the Digital Banker of the Year. So Kristen Kines, thank you for participating in today's session.

00:30:05:13 - 00:30:07:02
Atif Siddiqi

Thank you.