Analysis Featured

Lending as a payment method

Qwil provides debit cards to contractors which they can fund using mobile apps by transferring from their uncollected earnings for a fee. That not only allows 1099-ers to get paid quickly and keep track of all their earning and payment records in one location, but also makes it easier for businesses to pay out their contractors in a better-organized manner. This allows Qwil to charge a fee, similar to an origination fee, in the range of 0.5% to 7.0%. The customers are acquired by Qwil through direct API integrations with the companies for whom the contractors work. This allows Qwil to avoid the usually saturated marketing channels and to keep the customer acquisition channels proprietary and defensible.

$1.2 trillion per year market

The San Francisco Bay based public benefit corporation makes it apparent that the number one priority of their small team of 15 people is the independent (and individual) contractor. According to Reinsch, “over $1.2 trillion in independent contractor income annually in the U.S. is locked in a 30, 60 or 90-day invoicing cycle.” Qwil wants to help the 1099-workforce break free of the invoicing cycle. Bills do not wait for independent contractors to get paid, they just continue to pile up, and nobody understands this better than Qwil’s management team. As an independent contractor himself, Reinsch saw that there were a great number of inefficiencies in the payroll/accounts payable infrastructure. His team has set out to fix these issues with the Qwil app, with the hopes that they can make it possible for contractors to get paid as quickly as they are earning.

How It Works for the Users

The idea is that both independent contractors and companies can use the mobile app to track earning in real time, and once the contractor has earned the money he can be paid almost instantaneously without having to wait around for an invoice to be approved and paid. If the contractor completes a job and is owed $100, he simply clicks “cash out” and that $100 is issued onto a Visa debit card (that Qwil will issue) to be used immediately or the client can choose to have the money sent to his bank account in 1-3 business days. Qwil’s user interface is simple and attractive, making it accessible to and useable by as many people as possible.

Integrations with the employers

While Qwil’s mission is to “help individual contractors thrive,” they do a good job of advertising themselves as financial infrastructure that will also be beneficial to companies that hire contractors. Their website landing page reads, “Give your contractors the gift of instant pay without impacting your cash flow. We can handle all payouts and compliance for you as well!” This is a platform built to be advantageous to the individual contractor but needs the complete cooperation of and access to the company in order to actually work. But, Qwil has successfully made their product simultaneously appealing to both the employer and employee.

Though not public yet, Qwil has raised about $1mil in funding. Reinsch believes that Qwil’s ability to finance payments will drastically improve as they integrate with more platforms and gain access to greater lines of credit. Qwil has further received the full benefits from the fintech program of the famous accelerator 500-startups, fintech program which is run by Sheel Mohnot.

Without being lending

Unlike the average lending corporation, Qwil has uniquely designed a program using a new spin on traditional receivables factoring. Reinsch describes this approach as “floating the cash” for a period of time and charging a fee starting at .05% and going all the way up to 5-7% of the independent contractor’s payment. These fees dependent on how long it will take Qwil to collect the money for outstanding invoices for their clients, and are disclosed to the clients via the app each time the contractor “cashes out.”

10,000 clients in 5 weeks

Qwil currently has 10,000 independent contractors active on their system that went live in a private beta test only 5 weeks ago. Reinsch is one of these active contractors, and tests the app and program himself, using his own Qwil issued a debit card to “cash out” $1200 just a few months ago so that he could cover an unexpected vet bill for his dog. So, he says, “It works.”

Who Can Actually Use It?

In order to track earnings, Qwil must be able to connect with companies and platforms to gather income information. Their span of current connections ranges from entertainment, creative agencies and production houses to global staffing agencies. At this time, the number of connections is limited; they are currently working with less than 100 platforms but believe growth is imminent. Their approach is to reach out to large entities at the top of the pyramid that deploy thousands to tens of thousands of contractors. Reinsch says that Qwil will be “going online with a very large customer very soon. [Qwil] will be funding that with access to a $50mil credit line.” For the time being, if an independent contractor shows interest in using the app but is not affiliated with any of the companies that Qwil is currently working with, they use it as a potential acquisition funnel in hopes that they can get new platforms to integrate.

Unique model

What will make Qwil successful is their ability to operate as an alternative lending company that turns a profit without coming off as a loan shark to their clientele. Their transaction fees are disclosed upfront, and there is no recourse and no interest. What started as an answer to the question, “How can we make it so that independent contractors can be paid faster?” has now become a very interesting financial infrastructure to watch in the p2p world.

From a key performance indicator point of view, this will allow Qwil to keep cost of customer acquisition very low while amortizing the lifetime value of each client across many payments and repeat business for the foreseeable future. We believe that Qwil will be able to deliver both growth and profitability which is always a challenge.

 

Authors: George Popescu and Lauren Twardy

George Popescu       Lauren Twardy

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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