Comment by dragonwriter | Hacker News Reader

Comment by dragonwriter | Hacker News Reader

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> Would this be easy to scam if I know in advance that my income will be decreasing, especially if it will decrease incrementally?

They're using a non-disclosed algorithm to calculate an "average" that's not really an average, and holding on to all the money above that, and charging you $3/week for the privilege. If they haven't already constructed the algorithm so that its nearly impossible for them to ever be giving you a "boost" other than from your own deferred wages that they are holding on to, I'd be surprised.

> However, the insurance companies are also great at modeling their customer's risk.

Insurance companies also have to disclose the terms and conditions, including, particularly, the specific events that qualify for a payout and the amount of the payout; Even does not disclose this.

> It is a natural information assymetry and I'm not sure how Even could have a better idea of a customer's future earning then the customer.

Because of the non-disclosed "average" algorithm, there's an additional -- and potentially more significant -- information asymmetry working in the opposite direction of the one you describe.

Then they are almost assuredly in violation of some type of regulation. They can't just charge interest, call it a proprietary average algorithm and avoid all the regulation regarding publishing interest rates and such.

Also their about page is throwing red flags in regards to regulation. First off, it doesn't look like anyone involved has experience in either finance or the law. Secondly it says "We're not bankers. We're not a payday lender or a credit card company." That isn't up to Even, that is up to the law and this sounds a lot like those laws are being completely ignored.

> Then they are almost assuredly in violation of some type of regulation.

Quite possibly, not like they'd be the first startup to do that as a core feature of their business model.

> They can't just charge interest, call it a proprietary average algorithm and avoid all the regulation regarding publishing interest rates and such.

Sure, but what they're actually doing is charging interest on loans, they are holding money from your paycheck as a deposit before you need the loan, using the undisclosed proprietary "average" algorithm. Then using the same algorithm to determine when you are due a "boost", and paying that boost to you out of your own deposits that have been kept from prior paychecks, only giving you an interest-free advance if their undisclosed algorithm says you are due a boost and you have exhausted the deposits previously held-back from your pay by the same algorithm.

The customer's superior knowledge of their likely future income situation can't be used to game the system without knowledge of the algorithm which sets the rules of the game.

True, I guess it entirely depends on their average algorithm. However, if they are paying the boosts out of previously saved money then they this a managed bank account. If they are paying the boost on the assumption that it will be paid off in the future then they this is a loan. Either one is required to spell out the exact terms in a clearer way than Even's very simplistic FAQ page.

It just rubs me the wrong way that too often these days disruption amounts to "I am going to go in to X line of business, ignore the law, and pocket all the money any competitor would have to pay to comply with regulations."

I think the issue is less the algorithm (so long as the consumer is made whole, there's no issue) and more the "how are we making money here".

Disclosure is a big one when it comes to financial regulation. Something tells me there is an undisclosed source of income here beyond $150 membership fees.

Their competition - payday loan companies - are bad enough that none of that matters as long as they manage to satisfy enough loud customers. Ever hear of this company called Uber?

The difference here is that Uber had a lot of happy customers (taxi riders with better UX and a cheaper ride) and not-terribly-unhappy employees (erm, independent contractors). In the Uber case, regulators had to stare the absurdity of their regulation in the face.

If everything goes well for Even's customers, it's unlikely regulators will bother stepping in. But if everything doesn't go well, then Even is going to have a lot of pissed off customers and very few people in its corner. In a hypothetical Even case, regulators would get to cry "See! Look at all these examples of why we really need regulation!"

Furthermore, regulation arbitrage doesn't always work out, even when your customers love you (e.g., Aereo).

edit: also, unlike taxis, I assume avidly pro-consumer regulators already would love to squash payday loan companies but don't have the power to do so. Lumping yourself in as a "slightly better payday loan company" is like painting a target on your back. Seems like Even would want to distance themselves from that association as much as possible...

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