Brooklyn fintech startup aims to modernize payroll benefits

Every so often, Mike Jones gets a text from Alice:

“Looks like you spent $32 at the MTA for commuting this week,” the text reads. “You just saved about $12.79. Happy commuting!”

“I love getting those texts” said Jones, who serves as director of retail for local coffee chain Variety Coffee Roasters. “As a small business we want to take care of our people.” Alice, a Brooklyn-based HR-tech startup, makes that easier to accomplish, he says.

Launched in 2015, Alice is aiming to modernize payroll benefits by using AI to automate pre-tax spending.

“Our promise to our users is no forms, no math, no acronyms,” said Alice cofounder Avi Karnani. “Pre-tax spending products like Health Savings Accounts, Flexible Savings Accounts and Health Reimbursement Arrangements have been around for decades, what we are trying to do is make them accessible for today’s workforce.”

Alice works by synchronizing with a company’s payroll system. Employees then connect their credit or debit cards to Alice and spend as they usually would. Using AI, Alice will identify pre-tax eligible expenses made by employees, such as commuting costs, medical or dental care. Alice will text the employee to confirm the transaction, then update payroll with the tax refund.

The company claims that Alice can save employees thousands of dollars annually if used for all their commuting and health care costs. The average New York City commuter, for example, can add $583.03 dollars to their take-home pay, simply by optimizing their pre-tax spending. For employers, offering pre-tax spending can save them roughly 12 percent of every dollar spent pre-tax by their employees, depending on their location. Alice earns half of what an employer saves on payroll taxes each pay period.

“A barista in New York City making $15 an hour can get back up to $40 each month on commuting costs using our system,” Karnani explained. “In addition, your employer doesn’t have to pay taxes on that part of your income you use on commuting.”

Karnani and cofounder Paul Barnes-Hoggett designed Alice with lower- and middle-class workers in mind.

The duo received a Robin Hood Fellowship in 2014, which is offered to mid-career designers and engineers to spend six months learning about the issues affecting working-class Americans in order to use technology to solve those issues.

“We saw lots of Americans weren’t using the financial services available to them, mainly because they found them too complicated or cumbersome,” Karnani told Technical.ly. “We figured if we could automate the inconvenient parts of pre tax spending, we could have access to a huge market, because this could work for anyone who is employed.”

Alice raised venture funding through a seed round, and now works with over 200 businesses and thousands of employees, mainly in major cities like New York, San Francisco, Seattle and Chicago. Among their Brooklyn partners are Fellow Barber, Brooklyn Roasting Company, Blue Marble Ice Cream and One Girl Cookies. Their main clientele are typically startups and professional services companies with less than 100 employees. Alice claims a 75 percent enrollment rate with the businesses it works with.

Karnani believes Alice is just beginning to scratch the surface of its potential market.

“We think over 100 million people should be using Alice,” Karnani said, optimistically. “Everyone should know that pre-tax spending is the way to keep more of what you earn, and we will make it easy and understandable for you to use.”