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November 2, 2018

UK Start-Up Wagestream Wants to See the End of Pay Day Loans

"We see this as a ground breaking thing, the ability to stream peoples wages should be as easy as streaming Netflix’s"

By CBR Staff Writer

UK-Based Wagestream launched in January of this year and plan to tackle the financial stress workers are under as they count off the days till their next monthly pay check.

Unfortunately a traditional way for workers to ease the pressure is to turn to payday loan companies. The average payday loan people take out is £260. This of course comes with an extortion amount of interest — think in the thousands of percentages.

Peter Briffett CEO and Co-Founder of WageStream

CEO and Co-Founder of Wagestream Peter Briffett told us at Computer Business Review how they knew these companies were an issue, but the more they looked at the problem: “The more we realised how prevalent they are, how much they prey on luring workers in.”

“We know in the last week of the month they will increase their marketing spend three times, because they know that is when they get better conversion rates and more people need them. Financial stress isn’t a linear thing in a month, it grows exponentially at the end of the month.”

Unplanned events can derail someone’s carefully laid financial plans, an unexpected expense or a sick child in need of a doctor’s visit. You could be cycling home and suddenly one of your fillings falls out. Yet you are locked into an inflexible monthly pay cycle. It is easy to see why people turn to payday loan companies as a last resort.

Wagestream wants to redress this balance and give the worker more control over their own finances.

Financial Freedom

The Wagestream application lets workers withdraw money from their place of work ahead of that end-month pay check.

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Yet Peter is quick to point out: “It’s not a loan. They can only take money that they have earned. You have to earn it in order to have it.”

“What this is really is a financial cushion for them. An access to a form of capital that is there to have, and if you can get it in a very seamless and efficient way then it definitely helps them.”

Of course management may balk at the idea of workers being able to just withdraw money from the company outside of the payroll system. Peter does note that the two main reasons we have a monthly pay system is that it costs money to run a payroll and a weekly pay check can have an effect on a company’s cash flow.

Wagestream takes these issue into account and Peter points out: “Every time an employee makes a withdrawal, we facilitate that withdrawal, we pay for that, we have a banking facility that enables that to happen, so we are not impacting a client’s cash flow.”

Pay Day Loans

Wagestream held a funeral for Pay Day Loans

Wagestream

The way Wagestream makes money out of the process is they charge the employee £1.75 in a withdrawal fee and the enterprise pays a subscription of 50p per month for every worker enrolled in the program.

Peter told us about the many concerns they were hearing back from business.

“If I give this to my staff, they are going to run down the pub and they’re going to gamble it away.”

“The actual opposite is true, if you give someone back their financial freedom, they actual become more responsible and they are actually more productive and they take more control over their earnings.”

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The employer has control over the parameters of the application so they can set it so that staff can only take out 40 percent of their earned income and it can only be done twice a month.

“We even have companies that say if you are on probation you can take out 20 percent of your earned income and if you are passed it you can take out 40 percent,” Peter notes.

The company has just come out of a funding round where they raised £4.5 million from backers such as QED Investors, Village Global and London Co-Investment Fund.

Peter stresses the link between work and financial reward: “If you can make that strong then you get so many more benefits and people feel far more empowered and as a result people work hard.”

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