We live in an on-demand world thanks to the rise of new technology. Yet the money that pays for it moves at a glacial pace.
It creates a divide that is often filled by financial product providers that can easily kick off a spiral of debt.
"When you receive your pay once a month, the research shows that you're more inclined to make poor financial decisions with it," according to Earnd co-founder Josh Vernon. "Then it gets to the end of the month and you find yourself frying ice-cubes on the pan because you've got nothing else to eat."
Earnd is a new start-up that helps working Australians access their salary as they earn it, rather than when their employer chooses to pay it. But the company's ethos runs deeper than convenience: it is aimed at bolstering financial wellness and helping vulnerable Australians.
Emergency expenses can easily derail people's lives. One in five individuals have no savings, Vernon says, and more than one-third of the estimated 643,087 households that have taken out payday loans over the past three years have done so to cover unexpected expenses.
"In Australia, your options when that happens are quite predatory and it's difficult to find your way out of that situation. The options are often payday lenders, credit cards, or overdraft fees – and all of them are instruments which have the potential to get people into worse financial situations."
A Senate Inquiry into financial hardship considered the impact of many of those issues, recommending greater policing of the small and medium credit contract sector and consumer leasing sectors.
Real-time payments power flexible pay
Earnd works via an open API integration with employers' payroll, time and attendance platforms. This means it can accurately assess the amount of money they have earned and advance that amount to the employee on the employees chosen timetable (the employer's cashflow is not impacted as Earnd covers that payment).
Vernon says last year's launch of BPAY Group's Osko, which powers real-time transfers, was also a key to making the service viable. Osko is the first service to run on the underlying New Payments Platform (NPP) architecture.
"This wouldn't have been possible without Osko. I'm confident that a huge amount of the value in the product is that when people are in a place of need, they can get access to that money almost immediately, otherwise they're going to turn to a payday lender and get charged 20 times the rate that we charge via employers."
Prior to the launch of Osko, bank transfers could take up to two days between different lenders.
"Anyone banking at a bank which supports Osko payments or withdrawals made through Earnd are instantly transferred to their bank account. So if you're stuck on the side of the road and you need access to cash to put on your debit card or credit card, or you need to pay a dentist bill, you're able to get that money instantly, which is an incredible thing."
Earnd accesses the NPP and Osko via NAB, which is one of 13 organisations that collectively own the NPP.
The bank, via NAB Ventures, also took an equity stake in Earnd as part of a $2.5 million fundraising in March 2019.
"Having the banking infrastructure behind us means that we can offer a much more scalable product to our clients," says Vernon.
Benefits for employees as well as employers
Earnd charges employers, rather than employees, an ongoing fee for the service. Vernon says it can help support employee financial wellness, which builds loyalty to the business, in higher turnover sectors such as the retail sector.
"People stay for longer and are less likely to leave, and that leads to really clear return on investment for the employer. The other thing we see is that providing an individual with a direct link between the work they're doing and the financial reward leads to an uptick in productivity."
Earnd can also offer benefits for executives and higher-income earners.
"We know our employees come to work now for more than just a pay cheque, so employers are doing things like mindfulness and wellness days. But we don't have an opportunity to discuss financial wellness without seeming like we're prying into our employees lives even though it's the number one cause of anxiety and absenteeism at work. Earnd can give employers the opportunity to begin a conversation around financial wellness with the flexibility to move their pay cycle."
Earnd's current clients include clothing retailer Glue, logistics company Direct Couriers, as well as several smaller technology and insurance companies. Several other companies are also in the process of signing up.
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
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