Wagestream gives staff alternative to payday lenders: Fintech interview 30

Fintech Wagestream, which was founded last year, offers businesses a service where they can pay staff some of their earnings in advance of payday.

It gives workers access to the money they have earned straight away rather than at the end of the month

This is an employee benefit businesses offer so staff don’t need to go to payday lenders, for example, where they face high interest rates. On the other side it helps businesses retain staff is sectors like catering, where they typically struggle to do so.

Wagestream was founded in January 2018 and had its platform ready and its first client by June that year.

The platform currently has over 150,000 employees at 60 different companies signed up to the service.  The contract is between Wagestream and the businesses customers, which include Casual Dining Group, Rentokil Initial, Hackney Council and Roadchef.

Its early focus is on the hospitality. The driver for this is the need to improve staff retention in the sector. The hospitality industry helped Wagestream get a foothold when the pizza shop below Wagestream’s first office was its first customer. “Retaining staff is a real problem in most restaurant or pub chains and that is where we found our first customers,” said CEO and co-founder Peter Briffett. It also targets the retail, healthcare and facilities sectors. All of its customers currently are either in the UK or Ireland.

Wagestream does some of its business through partnerships, an example of which is its work with workforce management tool Workday. “If a business uses the Workday software we have an integration with that, which they can use,” added Briffet.

The platform links to workforce management and payroll systems with an app and management system in the middle. “When somebody takes out pay outside the pay cycle it is automatically deducted. “It is quite a lightweight platform that sits on top of everything,” said Briffet. “Every worker that voluntarily joins can download the app and see their earnings live.”

When a user requests payment the money is paid by Wagestream via its banking partner and it automatically recoups the money on the next pay cycle.

The bank makes money through charging interest and Wagestream makes money in two ways. Every time an employee makes a withdrawal of any size it costs them £1.75, while the business customer is charged a monthly software as a service fee of about £1 per employee per month.

Briffett, who comes from a background in the high growth tech startup sector, said in November 2017 he read an article in the Wall Street Journal about how Walmart was looking into flexible payment and its effects on staff. The article described how Walmart was looking at whether offering flexible pay would improve staff retention and productivity. “We thought what an amazing idea an realised that nowadays workforce management data or earnings data is cloud based, rather than on servers in the HQ, so it can be accessed and we can understand people’s earning every second of every day, and give them access to that.”

He said the UK was a good place to start. “In the US everybody is paid every two weeks, whereas in the UK 85% of people are paid monthly, so the financial stress is greater. As a result the use of payday loans and overdrafts is much higher in the UK,” Briffet explained.

The usage of the system and customer base that has developed surprised Briffet. “At the beginning it was about looking to give people this financial cushion but we found of you give people this link between pay and work the incentive to do more shifts increases.”

Another surprise was winning customers like Hackney Council. “We thought it would be more useful that businesses that pay staff by the hour but some of our customers now have salaried staff and it works in the same way.”

When I first read about the business model I thought it seemed a bit dangerous, with the opportunity for staff getting themselves into financial trouble by spending too much too early. But the fact that the average use is about twice a month per employee with the average amount taken just over £80, proves that people understand its purpose. Briffet said employees are not overdoing it because “they see it as borrowing from themselves.”

It also has controls on both sides with the employer able to set limits such as the percentage of earnings that can be accessed early or the number of times payments can be made. The employees can also set self controls.

Wagestream currently has about 45 staff which is a mix of commercial, onboarding and technology staff. Going forward the company is planning new services for employees that are signed up. This might include a savings product. Because pay goes through the Wagestream system for staff that have signed up features like automatically saving a certain amount a month could be added.

Read the previous fintech interviews

Part 29 Inbotiqa, Part 28 Mambu, Part 27 Evolution AI, Part 26 Funding Options, Part 25 FutureBricks, Part 24 Esme, Part 23 The ID Co, Part 22 Currencycloud, Part 21 Tandem, Part 20 Tink, Part 19 Goldex,  Part 18 Azimo, Part 17 Yoyo, Part 16 Bud, Part 15 Previse, Part 14 Finastra, Part 13 InstaReM, Part 12 Eucaps, Part 11 AimBrain, Part 10 Meniga, Part 9 TrueLayer, Part 8 InvestCloud, Part 7 ClauseMatch, Part 6 Rebuilding Society, Part 5 Honcho, Part 4 Akoni, Part 3 Wrisk, Part 2 CreditLadder, Part 1 Taina Technology