A new channel to promote financial inclusion

By Mateus Gomes, Business Development – SalaryFits

Employee financial wellbeing is fundamental to enhance engagement, productivity and lower turnover rates in the workplace. Employers have a unique chance to be supportive and careful about their employees’ financial health. With that in mind, responsible financial institutions and employers are levering from technology to promote sustainable credit offerings, insurance and other financial products to millions of employees.

According to the World Bank, there are still 1.7 Billion unbanked adults worldwide (2017) who are excluded from the formal financial system. On top of that, the vast majority of the population is considered ‘underbanked’ or ‘sub-prime customers’ for the banks and, therefore, has limited access to products that meets their needs and that have a sustainable pricing. In the United Kingdom, for example, payday loans firms can offer an APR to up to 1,000 per cent[1].

With that said, it is required that financial institutions and supportive employers look for innovative solutions to promote financial inclusion and the wellbeing of the “un(der)banked” population. A promising technology is allowing these individuals to pay for financial benefits straight from their salaries, resulting in more accessible financial products to employees of companies and no additional costs or workload for the HR.

A London-based fintech company developed a technological solution which allows companies to provide access to competitive financial products as part of their employee benefits package, together with an automated salary-linked payment feature at no additional cost to employers or to employees.

With a solution like this, financial providers can benefit from a cost-effective commercial channel and technology platform through which they will have better access to information, lower transaction costs, lower default rates and moreover significantly lower costs of acquisition. As a result, they are able to access an environment in which they can better understand consumers’ ability to pay, rely on the stability of their work relationship and have the reassurance of the willingness to pay element as a result of the repayments being made straight from the salary.

As financial providers benefit from lower costs and more customers, it results on more competitive offerings to the whole employee base of partnered companies. For instance, in the United Kingdom, responsible lenders and employers are offering payroll loans to employees with an APR that can vary between 4,9% and 10%.

Based on a £16,000 loan contract to be paid back in 3 years, an average British employee could save around £70 every month or a total of £2,500 if compared to the market average APR charged for consumers loans in the UK. This sort of proposition can improve the lives of millions of families, having already beneficiated more than 10 million of them worldwide. It is a win-win solution for all parties involved: employees, companies and financial institutions.

[1] According to The Telegraph.