Turning Philanthropy into a Double Bottomline Business: Ram Palaniappan, CEO of Earnin (Part 2)

Sramana Mitra: How big did the company become revenue-wise?

Ram Palaniappan: The company ended up with a private equity firm getting a stake in it. Subsequently, the company was acquired by a public company called Green Dot.

Sramana Mitra: Was the parent company financing it when you were brought in?

Ram Palaniappan: It was financed by two individuals.

Sramana Mitra: There were two individuals financing the company. What kind of revenues did you get to?

Ram Palaniappan: It was a private company. I don’t think revenues were ever shared.

Sramana Mitra: It’s an eight-year journey. What did you do with the company? How did you build the company? What did you learn from it? If that has a bearing on the genesis of the Earnin story, then I need the story of that company to be able to anchor the Earnin story.

Ram Palaniappan: There are a few things that are relevant. One is that the customer base was almost completely under-banked. They are usually facing the struggle of getting from paycheck to paycheck.

Sramana Mitra: How were you acquiring these customers?

Ram Palaniappan: Word of mouth and TV advertising. It was a customer base that I got to know well. It gave me a good amount of information and knowledge of how the whole payments infrastructure in the US works.

Sramana Mitra: You got some insight out of this that led to Earnin. Can you share what that insight was?

Ram Palaniappan: I found that some of my employees were running into overdraft fees and payday loans. One of my employees came and said, “There’s this person in customer support who’s got this situation.” I was surprised because I thought I was paying everybody well. I was surprised that my employees were going into these products that I thought were pretty bad. I spoke with her.

The problem was that she needed money the next day, but our payroll system would only pay her the following Friday. If she quits, she would get paid immediately for the work she had already done. Because she didn’t quit, she had to wait till the next Friday to get paid. She was getting into these bad products because she couldn’t wait till next Friday.

I tried to see if I could make our payroll system pay her. What I did was I wrote her a check from my own personal account and on payday, she paid me back. I was doing this for a handful of my own employees for several years. This company was in Cincinnati. I ended up moving to the Bay Area.

All of my previous employees wanted to know if I would still do it for them. I didn’t mind doing it, because I knew these people personally. Now that I wasn’t part of the company, what I didn’t know was whether they were really working or not. What I had them do is give me access to their account in the time tracking system. It’s the system where you clock in and clock out.

How it works is, if they wanted money, they would send me a message. I would log into the time tracking system and see how much they had worked. I was pushing out money from my bank account which showed up in their bank account the next morning. That’s how it started.

This segment is part 2 in the series : Turning Philanthropy into a Double Bottomline Business: Ram Palaniappan, CEO of Earnin
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