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02.11.16

Innovators’ Spotlight: PaySwag

payswag_logoThe mobile app that makes paying bills a rewarding experience

By Adam Perrotta, Assistant Editor

Retailers have long recognized the importance of customer engagement to drive sales and retain customers. But Reno, Nev.-based PaySwag is proving the power of engagement to improve results in a somewhat unexpected sector—bill payments. The company’s smartphone-based platform combines gamification and incentives, financial education and payment flexibility to make bill payments easier and more rewarding for the underbanked—thereby increasing collection efficiency for billers.

The company got its start in the automotive lending arena, with co-founders Max Haynes and Mark Miller—both financial industry veterans—devising a strategy to increase payment efficiency in a $1 trillion subprime lending sector plagued by a 25 percent default rate. After promising results in auto lending, Haynes and Miller realized their platform could improve collections in multiple sectors and developed PaySwag as a white-label app that can be used by billers in verticals including government, lending, health care, utilities and student loans.

Getting to Know PaySwag

Location: Reno, Nev.

Organized: October 2014

Open for business: September 2015

Line of Business: Simplifying the collections process for underbanked consumers, businesses and governments through a white-labeled mobile app with cash or card payment, reward, education and feedback engines. By combining mobile access and payment technology, the PaySwag platform gives borrowers the tools they need to make on-time payments and rewards them for doing so.

Secret Sauce: By leveraging technology and adding gamification into the mix, we’re able to make payments more accessible and rewarding for the underbanked.

Founders: Max Haynes, CEO, and Mark Miller, CTO

Funding: Approximately $1 million in private capital.

Business Philosophy: Don’t be afraid to try new things. Innovate without fear.

Something You Might Not Expect: In addition to state-of-the-art payment options, PaySwag delivers a revolutionary model of rewarding—rather than punishing—those who live paycheck to paycheck.

Unveiled in September 2015, the PaySwag platform is centered around an app that enables users to keep track of bills on their smartphones and make cash payments via barcode scan at more than 17,000 retail locations or via bank transfer or debit card within the app. Users earn “swag” points for paying bills on time, watching educational videos or engaging with games that increase financial literacy. Swag points can be redeemed for rewards such as gift cards, sports tickets and free DVD rentals. Users who can’t make a full payment have the option of creating a payment plan, which they can monitor from the app and earn points for sticking to it.

It’s All about Engagement

Engagement and rewards are key to taking some of the pain out of bill payments, according to Haynes. “Giving points and rewards for paying a bill makes the process a positive experience for the underbanked, who are also under-rewarded,” he says, noting that such users often are shut out of many incentives offered to the banked, such as credit card points. Ongoing engagement also is paramount, making smartphones the perfect medium to reach the underbanked—many of whom move often and don’t have home phones, Haynes notes. The company’s research revealed that up to 50 percent of bill-related mail is returned undelivered and roughly half of the underbanked consumers that billers attempt to reach do not use email. “The key was when we realized the vast majority of the underbanked own a smartphone,” he says. “The smartphone is their window to the world and how they want to communicate. That’s when we realized we had to build our platform around the smartphone.”

Communicating via mobile app also is more comfortable for many consumers, who might be reluctant to speak on the phone with a stranger about debt, says Haynes. With PaySwag, instead of avoiding a phone call, consumers establish ongoing engagement within the app, which offers positive experiences—such as earning rewards or learning about personal finance—making it more likely that they’ll be responsive when it comes to making payments. Mobile also enables users to make payments on their own schedule, rather than being limited to doing so during business hours.

“The key is to communicate on a regular basis—not just when there’s a problem or a late payment. You have to establish a channel of communication and leave that channel open,” says Haynes.

A Flexible Model

PaySwag’s business model can be adapted to meet the needs of different billers in different verticals. payswag_interfaceUnder one arrangement, the company licenses its platform to a biller, which then funds the cost of the various rewards offered. Another option is a percentage-based model where PaySwag funds the rewards and subsequently takes a cut of the payments collected. Under either model, billers are able to set the terms of payment options users receive. For billers serving the underbanked, every dollar spent trying to increase collection efficiency is money well spent, Haynes says. “Many underbanked consumers have lots of bills, so their No. 1 concern is which bill to pay.” Incentives and positive engagement are key factors in determining the answer to that question, he adds.

PaySwag’s first case study offered powerful proof of concept. Over a 12-month period, a subprime lender that implemented the PaySwag platform saw a 50 percent reduction in severely delinquent loans and recouped $4.22 million in debt across more than 12,000 unique payment transactions.

PaySwag is currently extending into the private and government spheres. Former Lieutenant Governor of Nevada, Brian Krolicki, serves as the company’s director of government relations, helping state and city government offices see the benefit of using PaySwag’s platform for help in collecting fines and fees. “States and cities are not typically well setup to collect cash payments for fines from the underbanked, so we think serving the public sector could be a game-changer,” Haynes notes. Other billing verticals the company is looking to enter include utilities, health care and student loans—all areas in which billers have difficulty collecting loan payments from the underbanked, who subsequently suffer consequences ranging from disconnected power to credit damage and penalty fees. “Anywhere there’s a lot of friction is where we think our platform can help both the biller and payer,” Haynes says.

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