Gusto Shifts From Payroll To Comprehensive Financial Wellbeing Platform – TechCrunch
When we met Gusto last year, the small business payroll startup had just raised $ 200 million and was launching a new office in New York City. Over the past few years, however, Gusto has also accumulated new features outside of its original payroll product, features that redefine the lines between payroll and financial well-being and, in so doing, blur the lines of payroll. the classic map of the financial technology market.
Today, the company announced a series of new offerings that it hopes will provide employees with better financial and health options through their employers.
Most interesting here is a tool the company calls Gusto Wallet. This is an app and collection of products for employees paid through Gusto that basically acts as a mini-bank and financial health monitor. It offers an interest-bearing cash account (aptly called cash accounts) that can also divert a small portion of each paycheck to a user’s savings, similar to products like Acorns and Digit. The money stored in the account now earns 0.34% interest, and you can also get a Gusto debit card to spend it on.
For employees, what’s interesting here is that these services are offered essentially for free: Gusto earns money on his payroll services from employers in the form of software subscription fees, and so he offers financial services like these to keep employers and employees engaged. Gusto hopes this can keep debt levels low for employees and also provide them with more financial stability, especially when businesses open and close in the wake of COVID-19.
In addition, Gusto Wallet also offers ‘Cashout’, which can speed up a payday in advance based on an employee’s payroll history. Rather than getting a high cost payday loan, the product is designed to help users smooth out some of their income if they need their paycheck a bit before their actual direct deposit. It’s also free.
Gusto CEO Joshua Reeves said that “one of the biggest problems is that people often live from paycheck to paycheck – either they don’t save money or they go into debt. accessing things like overdraft fees or credit card debt, or payday loans. The hope with Gusto Wallet is that its easy availability and low costs not only attract users, but leave them in good shape. better financial situation than before.
What interests me is to place these new functionalities in the larger framework of the fintech landscape. It seems like every week another startup launches a consumer credit card, or new debt product, or other savings app designed to help consumers with their finances. And then, every week, we hear about the credit card startup launching a new savings account, or the savings app launching an insurance product.
The math is simple: it’s very, very difficult to acquire a client in financial services, and it’s so competitive that the cost per client acquired is extremely high (think hundreds of dollars or more per client). For most of these startups, once you have a customer using a financial product, just like traditional banks, they want you to use all of their other products as well to maximize customer value and cushion those high CAC costs.
Gusto is an interesting game here precisely because it starts at the payroll level. Banks and other savings apps often try to get you to send your paycheck to their service because if your money is there, you are much more likely to use the features of that service. Gusto intercepts this transaction and owns it himself. Also, because it ultimately sells payroll subscriptions and not financial services, it can offer many of these features for free.
Reeves said, “It’s a future that just seems inevitable, as all of this information right now is in silos. How do you give the employee more ownership and access through one place? By combining payroll, 401 (k) planning, savings accounts, debit cards and more in one place, Gusto hopes to become the key financial health tool for its end-user employees.
This is the financial side. Additionally, Gusto announced today that it is now helping small businesses set up healthcare reimbursement accounts. Under a provision passed by Congress a few years ago, small businesses have a unique mechanism (called QSEHRA) to offer health care reimbursement to their employees. However, this program is littered with technical and administrative details. Gusto believes his new offering will help more small businesses create these kinds of programs.
Given Gusto’s focus on small businesses, this year has seen huge changes thanks to the global pandemic. “It was an inspiring, stimulating and motivating experience [and] galvanize time for the business, ”Reeves said. “Normally I would say [we have] three home bases: New York, SF [and] Denver. Now we have 1,400 home bases. This hasn’t stopped the company’s mission and, on the contrary, has brought many of its employees closer to the small businesses they ultimately serve.