The rise in salary finance, which has been brought to the UK market by the likes of Wagestream and Hastee, comes following a huge overhaul of the UK’s high-cost lending industry, which has seen loan giants such as Wonga and Quickquid fall into administration in the past year.
Whilst high-cost credit or ‘payday loans’ is commonly used by nurses, supermarket workers, soldiers and retail staff - the result of mass lending with slack affordability checks has caused huge debt problems for millions who cannot escape the debt spiral.
The role of salary finance means that funds are available to employees before their pay date, removing the need for payday or other high cost lending. If the employee has worked for 10 days, they can drawdown this money immediately - and Hastee gives customers the option to access this on a debit card too.
James Herbert, Founder and CEO at Hastee, said: “Now more than ever, workers in every sector need fast and flexible access to the money they earn. The effects of COVID-19 have emphasised that current payroll systems leave many struggling for the liquidity they need at pivotal points in the month. Hastee Card is the natural evolution of the work we have been doing to help support workers and employers in the UK, and we’re excited to be spearheading a solution that revolutionises an outdated process and brings greater financial wellbeing to those who need it the most.”
Wagestream charges just £1.75 for an employee to make a stream of any size, similar to an ATM charge. The employer pays just £1 per employee, per month and has already signed up the likes of Bupa, Leon and Holland & Barrett, integrating with the company’s HR systems.
Whilst many economists claim that payday lending will never disappear and will continue to be used by 3 million Britons each year, the role of salary finance could act as a viable alternative, provided enough companies and large employers get on board.
Another startup eager to provide a financial alternative for employees is Fund Ourselves. The London-based start-up offers a peer-to-peer platform to connect investors and short-term borrowers - offering investors returns of up to 15% per annum and lower cost rates on loans. With loan products lasting just 3 months, there are no late fees if the customer needs to extend for up to 12 months.
