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Gusto Launches Challenger Banking Service

Is there room for another challenger bank aimed at serving the underbanked? Payroll, benefits, and HR solutions firm Gusto thinks so.

The San Francisco-based company announced the launch of Gusto Wallet today. Exclusive to employees of the 100,000+ businesses that use Gusto’s payroll services, the mobile wallet offers direct deposit, banking tools, savings accounts, and access to emergency funds.

Among the benefits of Gusto’s new account are savings goals, a debit card with free ATM withdrawals, and a unique feature called Gusto Cashout. The new tool allows employees to access money in between paydays. The amount borrowed comes with no fees and no interest, and is repaid automatically from the employee’s next paycheck.

The accounts are aimed to promote financial wellness. In addition to the Gusto Cashout feature, Gusto pays a higher-than-average return on savings goals. Users can earn 0.34% APY on up to five goals. And in order to help encourage accountholders to save, Gusto Wallet offers users the ability to automatically route a portion of their paycheck into their savings accounts.

Like most U.S.-based challenger banks, Gusto is partnering with an incumbent to power its accounts. The company has teamed up with Kansas City, Missouri-based nbkc bank to back its accounts. Other fintechs that use nbkc bank to offer challenger banking services include Betterment, Joust, and Truebill.

Unlike most challenger banks, however, Gusto Wallet has direct deposits built into its design. Most banks fight hard to get their users to directly deposit their paycheck into their account by using expensive promotions and incentives. My personal bank once offered me $300 to sign up for direct deposit. Gusto, however, doesn’t need to do this, since payroll deposit is built into its mobile wallet and it is limited to users whose employers pay them via Gusto’s payroll service.

Along with the Gusto Wallet launch, the company also announced today it is helping small businesses set up health reimbursement accounts via a program called QSHERA.

While Gusto’s Cashout feature may be appealing to the lower income, underbanked population, the company may need to add another feature or two to compete with popular challenger banks such as Chime and Dave. For example, Chime offers fee-free overdrafts, and pays 1% APY on savings goals and Dave helps users build their credit score via a partnership with LevelCredit.

Photo by Lesly Juarez on Unsplash