Money Power with Nico Simko

[00:00:00] Hi, it's your kids. Lock the doors. You're listening to HR's most dangerous podcast. Chad Soosh and Joel Cheezeman are here to punch the recruiting industry right where hers. Complete with breaking news, brush opinion and loads of snark, Bottle Up Boys and Girls. It's on with Chad and Cheese Podcasts.

[00:00:21] Oh, yeah, it's Lenin Squiggy's favorite podcast, aka the Chad and Cheese Podcasts. I'm your co-host Joel Cheezeman. Join us always. The LeVern to my Shirley Chad Soosh is in the house. And we are welcoming Nico Simcoe to the show he's founder and CEO at Claire, a company with a radical idea. Getting your paycheck the minute you clock out of work. Nico welcome to the podcast. Thank you so much for having me.

[00:00:51] Nico Simcoe, get some tell me a little bit about that name. Nico Simcoe, yes. So I was born Nicolas Simcoe but I felt that Nico Simcoe was the rhymes. It's easier to say it's short. It usually you know when you put it on a slide, you don't have to go to the line if you put it as Nico so branding. This is all a branding thing. This is all a branding thing. So Nicoa lot of our listeners don't know you. They probably don't a lot of them don't know what

[00:01:21] know the company. We'll get to the company a second. Let's let's dig into you for a little bit. What makes Nico click deep dark secrets, Nico bring it great taste and I wear by the way great taste and I wear and if you would talk

[00:01:34] into the microphone that would be helpful. I will try I have to look in the distance. I have to look in the distance sometimes. What how am I going to answer?

[00:01:42] I'm looking at Joe's eyes. Exactly. No, honestly would make me click is and it's going to sound really boring but it's really true. It's the people. It's always about the people. If you ask me what I would put on my Twitter bio, that's what it would go. It's the people. It's the people. That's it.

[00:02:00] It's not sexy, but it's an answer because people are stupid. I mean, come on. Let's say people are stupid. So what about the people about bringing them along around

[00:02:10] shepherding them around patting them on the head to get me what's good?

[00:02:14] Just the team. Look, we are fully social animals and like we you know, we're not like we're not like normal animals. Like what we like to do is do things together. And I think that

[00:02:26] that's one of the things that for me gets me to click. Like it's when you can work on it with a team on a really cool, ambitious project. It's when you've had a really long day and you're at home and you're decompressing around a beer with a bunch of friends. It's when you go. That's more fun. You get on a plane exactly. You get on a plane. And you go to somewhere you've never been before. And people do very things very differently than you did growing up or where you currently live.

[00:02:56] Right. It's the people in Nico's defense. We pulled him out of his high school econ class for this interview. So he hasn't had a lot of life experiences. So people, people is what he's got and what he's going for. I will add he's being humble. You were a Forbes 30 under 30. You're Harvard graduate and your undergrad was in Geneva of all places. Correct.

[00:03:16] Well, my high school was in Geneva, but I went to Harvard University for college. Yes. There you go. All right. Enough about you. Okay. Let's get into the company.

[00:03:24] And quite frankly, one of the hottest trends in employment is this whole daily pay thing. This pay on demand.

[00:03:31] So talk about the company, the Genesis, how did this thing get rolling?

[00:03:35] Yeah. I'm going to give you guys a two second gist.

[00:03:38] Can pay your friends in two seconds through Venmo, through Zell, through whatever you want.

[00:03:42] Why can't you do this with your paycheck? Good question. That's it. That's the story of the company.

[00:03:46] So why is it that companies haven't moved to this methodology already? I mean, the technology,

[00:03:56] it's not like the technology's not available. It's not like all these different platforms,

[00:04:01] these human capital management platforms don't have payroll systems in them. So why is it taking so long

[00:04:07] for people to get paid because because companies like sitting on the capital and getting the interest?

[00:04:12] I mean, what is it? Is it just that easy? There's two fundamental things. If a business today

[00:04:17] wants to pay their employees immediately, they're going to face two issues. One, go to restaurant,

[00:04:24] swipe a credit card, pay someone, that money's not going to get into their bank account for next

[00:04:28] two, three, four or five days depending on if you're on a Friday, if there's a holiday, whatever it

[00:04:31] is, it's going to take time for them to get into a bank account. So basically the business has to

[00:04:35] like suddenly go and raise capital somewhere. If they're not doing that, then actually money that

[00:04:40] you owe for payroll is pretty great, money management and treasury management because you

[00:04:46] delay your account payables. And so there's no real financial incentive for the businesses to do it.

[00:04:51] The second issue is the tax code. Most people in America are paid what we call W2, which is they get

[00:04:59] a paycheck in the mail and then they think their paycheck is going to be high but it's always

[00:05:02] lower why? Because there's a lot of taxes and deductions and all of this. That makes running payroll

[00:05:07] actually pretty complicated because you have to calculate all of these things, you have to

[00:05:12] account for them. It's not a very straightforward process and with that, with the tax component is

[00:05:18] that the money doesn't travel immediately. Now that might change with real-time payments but

[00:05:23] still if an employer wanted to do it they're going to still face the two issues which is they have

[00:05:26] to calculate the taxes. These taxes can change in addition to this. Somebody needs to front the capital.

[00:05:31] And I assume you guys solve this problem. Exactly. How often do the taxes change where you have to

[00:05:36] fix this formula all the time? It's not always a moving target is it? Is it like an annual quarterly?

[00:05:41] I mean, why is this a problem? It is a problem because there are things that always pop up. If you take

[00:05:48] the average worker, they will not work a fixed salary job. They will work an hour-day job. If you

[00:05:55] take the average worker, they will take over time. If you take the average job place, the hours need

[00:06:00] to be confirmed by the manager in order for this to be calculated. The manager has to confirm that

[00:06:06] those were overtime hours. They need to look at the latest list of how much is that overtime

[00:06:12] calculated for? If you're working in delivery, there are laws around the idea that if it's more

[00:06:17] raining that day than another, then you should owe the person a bit more money. Those things add up

[00:06:22] to the complexity where operation for business. It's better to do this every two weeks than to have

[00:06:26] to sit down every day and actually confirm that all of that is done. I agree AI a lot of technology

[00:06:32] can help with it, but it's still really complicated. Do you guys solve that for them? Or are you just the

[00:06:38] financial sort of... Do you guys loan them the money and they pay you back? Do the employees...

[00:06:44] Are they it? Is this a payday loan thing where they're on the hook for the money? Talk about

[00:06:49] I guess the backend stuff of this because it sounds a bit complicated. We advance the money to

[00:06:54] the consumer based on the data that we have from the employer because what we want to do is say,

[00:06:58] look employer, you want to offer this but you don't want to deal with it. That's every employer

[00:07:04] we talk to. That's what they tell us. We work backwards from the person who runs a

[00:07:09] charge and average business was like I would love to give this to them but look at the stack of work

[00:07:13] I have to do. How do I do it simply? We will front the money to the consumer. We will all

[00:07:18] we want as the data so that we can make an underwriting decision and then the employee repeats that we

[00:07:22] don't charge any fees when they sign up for a bank and that's the only way today to take in advance

[00:07:27] the money they need to sign up for a bank put the direct deposit there. It's basically a micro

[00:07:31] loan you give to consumers that they repay at their next paycheck without any fees. That's basically

[00:07:36] the product. How do you get paid if there's no fees? Brilliant question. What we do is we sign them

[00:07:42] up for a new bank, they put their direct deposit there and then we give them a card. It's a cute

[00:07:45] little blue card that employees can use in order to pay for certain expenses. When they do let's say

[00:07:50] they go to trade or jose here in New York. They're going to Chipotle. Perfect, Chipotle. That makes

[00:07:55] even more money for us. That's great. So basically Chipotle the buy burrito they get the extra guac it

[00:08:01] cost them more than they thought so it's $13 or $14 we are going to receive approximately 1.21.3%

[00:08:10] of that transaction is going to go back to master card and master card is going to give that back

[00:08:15] to us and we don't like this is a relationship between Chipotle and master card issues that we have an

[00:08:19] agreement with master card because with the program manager that we get most of it back to us and

[00:08:23] that's how we make money. Are you a debit card or a credit card? Is this a debit card? The company is

[00:08:28] paying you for the fee of the transaction and if they try to overspend what they have it's like

[00:08:33] sorry no burrito for you basically no burrito for you credit card. That's a sad day, Jesus. But

[00:08:39] the story is this is that when I talk to a bunch of hourly workers they're feeling with this look

[00:08:45] I'm at the gas station it's the 28th of the month. I've started paying some bills my credit card

[00:08:50] bail and all of that and I'm two three days away from my paycheck arriving or sometimes it's 5 6 7

[00:08:54] depends and I'm at the gas station I swipe my card and it denies the cards denied and that is

[00:09:00] one of the most frustrating and most painful experience you can think of you're at the gas station

[00:09:06] you need gas to get home how do you do it? It has happened to many many many people out there

[00:09:11] and the idea was like hey you've actually made a loan to your own employer why do I call it

[00:09:16] this way? It's because you've worked and they owe you money you're lending to them so why can't

[00:09:21] you just pull 20 30 dollars to get gas and you know and the car and keep going and that particular

[00:09:27] use case is where we said oh my god we're about to build the biggest financial institution in

[00:09:32] the country because we're gonna give free advances to people on top of that there's gonna be a great

[00:09:36] card and people are gonna love us for it we're in lining our incentives we're not trying to kick

[00:09:40] them you know when they're at the bottom what we're trying to do is actually be there oh my god this

[00:09:45] bank was awesome let me tell my friends they should sign up for it because it's and that's where

[00:09:49] the idea of Claire came up so let's take a look at the entire the entire kind of structure right so

[00:09:54] these are individuals who at the end of the month they need that cash and we do know that at

[00:09:59] least a third of the population at the end of the month they need that cash right they less than

[00:10:05] a thousand dollars in their account at any time right so what's the incentive for anybody let's

[00:10:10] say for instance like in the middle stack right I mean I don't need the money I've got more

[00:10:17] in savings is that actually you know an addressable market for for you and because I'm asking

[00:10:23] that because there are some major Fortune 500 companies who employ those people who could easily

[00:10:30] obviously start using a service or a system like yours pretty quickly I would assume and that

[00:10:36] would be a great benefit to any individual who's coming in completely we have people on our

[00:10:42] application that signed up for the bank never took away advance and when those cohorts three or

[00:10:47] four years ago started coming in I went in our database and I just texted one of the user and I

[00:10:53] said hey I you know would you be willing to get on the phone with me for 20 minutes

[00:10:57] half of them thought there was a scam so it took me a while to get onto the phone with someone

[00:11:01] because like why is this you have this company calling me and honestly I got on the phone with them

[00:11:05] and after one or two phone calls some of them were not really fruitful somebody said you know

[00:11:10] told me it's like hey Niko you know the reason why I signed up for Claire is because I don't need

[00:11:15] the money everyday most workers don't want the money every day that's where she told me but knowing

[00:11:18] it's there makes me feel more financially free and that became a mission make America's workforce

[00:11:24] feel financially free it's not about you taking advances I don't I we do not track that like an

[00:11:29] investor asked me on a board meeting oh so how many often do they take advances like I just actually

[00:11:33] don't know because what I care about is are they actually happily banked with us and for us the

[00:11:38] feature of getting your money right now is the free thing we give you so that you know you can

[00:11:43] feel better at night that's really but using the card is how you guys get paid right so they I mean

[00:11:49] at some time they have to use the card so I would assume and I'm sure you take a look at this because

[00:11:56] this is this is your revenue stream that we look at when you take a look at when you take a look at

[00:12:01] uh actual users are percentage of the actual user base on a monthly basis how often do they use

[00:12:07] their cards just in an average so on average people will spend 80% of their paycheck on the click

[00:12:15] so okay we are the primary bank account well that for me is success is that they trust us enough

[00:12:22] when they pull the card out of the wallet they're like that's the bank that I want although

[00:12:26] we're partnered with a bank we're financial technology platform on top of it it's FDIC

[00:12:30] insured they're called password but they really feel like the banking solution they get out of us

[00:12:35] is holistic enough that with a primary choice do you guys offer any interest on those accounts

[00:12:40] or not we do we have a savings account we open before we advance any money to people

[00:12:44] because we want them to save and so we give a PY it changes with the market changing I don't

[00:12:49] exactly know what it's at right now but it's correlated to what the FFNs are you saying?

[00:12:52] It can be worse than Chase uh it can't be worse than face on the on the on the tax side I'm curious

[00:12:59] so when you work as part of the wait staff of a restaurant obviously you get two dollars and whatever

[00:13:04] it is an hour and then you get tips on top of that the company gives you your tax information in

[00:13:11] the terms of your annual salary and then you have to report the additional tips does the company

[00:13:17] give you your tax tax information on regards to your hourly salary in this situation so basically

[00:13:23] I have to sort of keep tabs on save enough for taxes the company doesn't do it for me like walk

[00:13:30] me through the tax situation as a worker yeah so this is the beauty of our system this is where we

[00:13:35] add a lot of value is that we remove that away from both the employer and the employee what we'll

[00:13:40] know is that say go to a restaurant worker again I'll use your two dollars an hour plus the

[00:13:44] rest of the tips we'll know that this person make two dollars an hour we know like because of how

[00:13:49] much data we have that there is a 99% probability that giving them a dollar per hour call it

[00:13:57] is completely fine and it's like you we will get our money back we will give them a dollar per hour

[00:14:02] now luckily most employees will not be making two dollars an hour they'll be making seven 15 20 25

[00:14:08] dollars so they're making more per hour but that's the value of our algorithm is that noted with

[00:14:13] thousands of workplaces as we can analyze this data and get it as close as we can without taking

[00:14:19] any credit risk and you will be able to actually provide spending habits to for the entire American

[00:14:26] population who are using this card so I mean it you know when the the dollars hit the bank and

[00:14:33] you know what's being bought pretty much right after those dollars hit the bank I mean to be able

[00:14:39] to to have that data and as we take a look at generative AI and in what not being able to crunch

[00:14:45] that kind of data to be able to provide the kind of spending patterns back to the markets this seems

[00:14:51] like a play more for data in understanding the consumer market than it is even on the pay side

[00:14:58] that is exactly why I believe that sure getting your money as quickly as possible is an enormous

[00:15:05] product and we're doing it well it's what I live for but we're actually building the best financial

[00:15:09] institution in the country because what you're talking about here is you're marrying your bank

[00:15:13] to all of the information you have at work so I can give you a list of products that do not exist

[00:15:19] today but that could exist one one of my favorite examples today is I take the subway here in New

[00:15:23] York and I go to work that is a pre-tax event that is something that technically the tax code allows

[00:15:29] you to do as a pre-tax event why we going to work so there's tax inset like you will get tax rebates

[00:15:33] why can't I get that cash back immediately why can't I just swipe and says oh great we've connected

[00:15:37] all of that back to your payroll you get 10 cents back on this transaction why can't you actually

[00:15:42] instead of taking wage advance you say please make my unpaid payroll a collateral account

[00:15:48] and then help me use that to increase my credit score why because you're like look I'm working

[00:15:54] my hours my money's aside now can I use that as a proof that I'm going to get paid you can get your

[00:15:58] credit score you didn't do anything you just want to work and your credit score goes up at their

[00:16:03] products today that could help america's workforce get so much more ahead financially where they are

[00:16:10] that today don't exist because the banks don't marry to your workplace okay that that's just a

[00:16:15] mind blown scenario right there because again again you're working on the base of allowing people

[00:16:22] to get money right after they they've rendered services I mean that's what it comes down to right when

[00:16:26] you go and you go into a store and you have somebody sharpened you know a saw or something like that

[00:16:31] you pay for rendered services right this is exactly what we're you're talking about is I go to work

[00:16:37] on a daily basis I've rendered services therefore you pay me right then then I go and spend money

[00:16:45] or wherever it might be you're going to have access to all of the data to where that money has been

[00:16:51] spent from a spending habit standpoint not to mention as you had said which goes above and beyond

[00:16:57] you know all the people who actually came through into took the subway system whatever they came

[00:17:03] into work they did work and then there's the tax incentives that actually go back to the companies

[00:17:09] so I mean this is there's a huge reason why a company would want to use this because they have

[00:17:15] proof that here's my workforce here's what my workforce did now give me my tax incentive money

[00:17:21] exactly right so there are so many different avenues of approach for you to actually use this data

[00:17:27] then you can actually go back to the US the BLS any of those departments who want data on spending

[00:17:34] habits and in workflow so on and so forth this is exciting just from a data standpoint so Chad is

[00:17:41] super excited all right all right all right all right all right all right all right let's look at

[00:17:45] some of the other things benefits companies get from this because I'm I got to imagine asking

[00:17:50] them to change the way they've done things forever is not easy there are a lot of research out there

[00:17:57] and posts about absenteeism and retention improvements with a system like this can you talk about any

[00:18:05] data that you're seeing in terms of companies having people show up to work and not ghosting them

[00:18:10] like anything around that that you can share we have seen that with Claire you have 1.52x more

[00:18:18] people applying for a job I was in the subway this morning there was a company I don't think

[00:18:22] they worked with us but they had they listed why you should come at work the only one that was

[00:18:26] bolded is get paid daily I think people have realized that getting your advance on your like

[00:18:31] getting your money as soon as you finish work which it sounds so simple to say I have no idea why

[00:18:37] I had to start a company in the space I feel like this should have been solved 20 years ago I'm

[00:18:41] serious and so I'm like great somebody left this opportunity for somebody to jump in but like what

[00:18:46] happened to society that nobody you know thought about doing this before and so that increases

[00:18:52] people wanting that job the second thing is people I've heard anecdotal stories and I don't

[00:18:59] know how this transformed into data I've had an employee tell me in one of the user research I've

[00:19:03] had is like look Nico I sign up for Claire because I work at this restaurant I will parse your name

[00:19:08] of the restaurant and I used to be sick at the end of the month and you go drive Uber and I said why

[00:19:14] he put air quotes in there for the listeners exactly he told me he was like look Nico like I kind

[00:19:19] of just wanted to make the money right now because it gets tight at the end of the month so and then I

[00:19:23] saw this and I was like okay I'm not gonna call sick anymore and he was like I picked up more

[00:19:28] shifts and he gave me an incentive to pick up more shifts up winning and that's I then I met a nurse

[00:19:34] who was in the suburbs of Chicago and she was telling me this story she was like look who I like where

[00:19:38] this is going he met a nurse in Chicago we were launching the product we had the cars on site we

[00:19:44] know where this goes what are you doing step bro that's all right continue so she she basically was

[00:19:53] like I had a job offer to go somewhere else across the street and to make 50 cents more per hour

[00:20:00] which is where's a big deal for her she was a assistant nurse and she told me look I didn't take

[00:20:04] the job because I knew that like the knowing I could get my paycheck at any point gave me more

[00:20:11] financial stability than a 50 cents increase so you retain your workers a little bit longer now

[00:20:17] I'm not gonna be around and be like I knew exactly the number it's going to be at your exact workplace

[00:20:21] of retention no no no no I'm not in that business because I think it varies a lot business by

[00:20:25] business and it's hard for me to give like a number but I think the facts and the quality to facts are

[00:20:30] there that these products are very needed for the workplace in for employers so Nico this industry is

[00:20:35] not without its critics and its regulations and government interference so Nevada and Missouri

[00:20:41] or two states that have implemented or introduced laws where you have to be licensed and you're into more

[00:20:47] what's going on so explain what's going on there and you simply have a lot of people point the

[00:20:52] fingers at this is sort of a payday loan thing daily pay one of your competitors on trust pilot

[00:20:59] and not that stuff to be all-in doll but it has you know one star out of five you know 600 some reviews

[00:21:04] like people don't like to service I don't know if that's the company or the actual what they're doing

[00:21:08] so talk a little bit about the government regulations and some of the customer or critical

[00:21:13] you know opposition that you're getting to the business fair foul look when we started this

[00:21:18] business it wasn't clear whether this was alone not alone I loved a duck test not sure if

[00:21:24] you guys know what a duck test is but if it looks like a duck oh duck walks like a duck swims like

[00:21:29] a duck sounds like a duck what is it it's a duck yeah and so whenever I would just talk to any

[00:21:36] lawyer I'd say I would like to advance money to people based on payroll data and then for them to

[00:21:41] pay me back once they get paid and they're like that sounds like a loan and every single time it was

[00:21:46] the same so I was like well but everybody else doesn't call it alone and it seems like their states

[00:21:50] have decided this is not alone and so they're like walk high like you do what you want but this looks

[00:21:56] like a duck again and so I sat down and I said hey if I'm fresh and new to this at least from a

[00:22:03] compliance perspective and everybody's pointing to the fact that this looks like a duck but everybody

[00:22:06] wants to ignore it I said there might be defensibility here there might be something that really sets

[00:22:10] us apart then so I understood why calling it alone was actually complicated because it costs a lot

[00:22:16] of money you have to create a consumer lending program you have to get licenses in most states you have

[00:22:20] to get audited by most states you have to not only some licenses some states require three licenses

[00:22:26] right not only one so you have to apply for each of them you have to maintain them you have to have

[00:22:29] an internal compliance you blah blah blah I can keep on going right and so I said well we're going

[00:22:33] to do it and so I went over to the investor and said I have two options I can do this in a way

[00:22:37] that is like I'm pretty sure it's gonna be fine because there's laws attached to it that have been

[00:22:42] there since the Truth and Lending Act in the 70s so we had to do it this way or we go cowboy and

[00:22:48] we're like we hope make all the states are going to agree that this is not alone might happen

[00:22:53] and we decided to go the more conservative route and so that really helped us from a business

[00:22:56] development standpoint but it's still a debate out there it's still a debate well I mean at the end

[00:23:01] of the day you were taking a look at the prospect of which are out there today in some states not

[00:23:07] all states predatory payday loans right which used to be against the law but they're not in some

[00:23:15] states now but what you're saying is this is not a we give you $20 you give us 40 when you get paid

[00:23:23] scenario you're not getting paid a big off of you know the dollars from the actual consumer slash

[00:23:32] worker you are making that money through transactions via master card exactly that's exactly right

[00:23:40] I can see where obviously you know some would be would would want to know more because there are a lot

[00:23:46] of predatory shit that's out there it sounds too good to be true oh yeah that sounds too good to be

[00:23:51] true until you start to get deep into the actual data play and the understanding of you know how

[00:23:58] the how the monetization works and that's the big the big key so have you been talking to legislators

[00:24:05] about this and how long did it take for you to actually educate them for them to understand that

[00:24:12] this was not something that was bad for for workers we've never charged it Claire fee for wage

[00:24:18] advance I think look when we talk to consumers many of them don't want Claire because it requires

[00:24:23] them to get a new bank account so consumers sometimes they hate like I just want this once I just

[00:24:27] want to pay three bucks and get it right now and it's the best thing so I get why as theoretically in

[00:24:32] the market this should exist and I think it's right thing for consumers we just for the

[00:24:36] for the past years never charge a fee for for this because we're like we want to be a bank want to

[00:24:40] be a big financial institution in the future yay like it's like let's go for this big dream right

[00:24:44] and when we talk to legislators we are very funny horse because we're like hey we went overboard

[00:24:52] on licenses I come with a truckload of them and I did I did all the work and by the way I've never

[00:24:57] charged a fee so they're like you never did the fee thing and you got all the licenses

[00:25:01] who decided this because it's like it doesn't make much sense but the reason why we did it

[00:25:06] and the reason why I think it makes a lot of sense is because it protects us from a compliance

[00:25:11] perspective and we're doing the right thing for consumers that's it I just don't want to deal with

[00:25:15] some states some days having a debate and now I need to go and like with everybody else in the

[00:25:20] group and go tell them why like I have other fish to fry I have a business to build so let me pay

[00:25:24] the bill once get all the licenses and then move on you had me at Chipotle

[00:25:34] oh that is Nico Simco everybody Nico for our listeners who want to know more about you or the company

[00:25:41] where do you send them get claire.com that's g-e-t-c-l-a-i-r.com thanks and we'll let

[00:25:48] we'll let you get back to econ class we appreciate your time chat that's another one in the can

[00:25:54] we out we out. Thank you for listening to what's it called podcast the chat the cheese

[00:26:03] pre-end they talk about recruiting they talk about technology but most of all they talk about

[00:26:09] nothing just a lot of shout outs of people you don't even know and yet you're listening

[00:26:15] it's incredible and not one word about cheese not one cheddar blue nacho pepper jack swiss

[00:26:24] so many cheeses and not one word so weird any who you should have subscribed today on iTunes

[00:26:33] Spotify Google Play or wherever you listen to your podcasts that way you won't miss an episode

[00:26:41] and while you're at it visit www.chat cheese.com just don't expect to find any recipes for

[00:26:50] cheese it's so weird we out