The majority of us will have had that conversation with the bank; yes, I went overdrawn – why add all these charges when it’s very apparent that a lack of money is a problem of mine? That’s why I went overdrawn in the first place…
Unfortunately, when it comes to debt, mid- to low-income earners are hardest hit. The discomfort of not having much in the bank brings with it a tide of higher interest rates and increased bank charges – basically, financial punishments for not having enough money. The irony was not lost on myself and Daniel Shakhani, so we set up SalaryFinance.
The cost of being in debt
It all started with my children’s nanny. I was staggered to find out that she would spend a huge chunk of her salary on high-cost debt repayments. She wasn’t necessarily making a dent in the debt itself; just paying the interest with very little prospect of lifting the actual monetary weight from her shoulders any time soon. Too many of us know what that feels like. She didn’t want charity, but as her employer, I wanted to help her get on top of her finances. In letting me pay off her debt, then arranging repayments back to me through her salary, she chopped a significant amount off her interest bill, while still remaining financially independent. So, the cogs started turning, and I thought; why not introduce this on a wider scale?
Evidently, we are a nation which doesn’t enjoy saving. Perhaps that’s because – for younger generations – the notions of owning a home or retiring on a decent pension are considered unrealistic and flat-out unaffordable. So, we may as well just spend our money now and enjoy ourselves, right?
Brits have developed an appetite for borrowing again. Our income-to-debt ratio is at its highest since 2008, with the average UK household owing £4,000. Hand-in-hand with this comes our ever-increasing love of payday loans. Many people see this type of loan as their only option after being rejected by a bank. But as a payday loan user, you can often be flagged as a bad risk for five years, so banks may not lend to you from then either. Essentially, if you’re suffering with debt problems, a lot of the short-term solutions will just come back to bite you in the long-term. For SalaryFinance, the solution is not to introduce new loans; it’s about consolidating, simplifying, and lowering interest so that the cost of the debt itself is reduced.
So, what exactly is our solution? Myself, Daniel Shakhani, and ex-Google UK boss Dan Cobley collaborated to form a company which helps consolidate employees’ debt into a single loan with a fixed 7.9% APR, paid off in instalments through the employer’s payroll system. Since our launch in 2015, we’ve saved customers £900-£1500 on average. As Daniel says, that’s enough for a savings pot. As an employer, you are addressing financial wellbeing and start to get an holistic approach to savings. In doing so, you’re building better, happier, and more productive employees.
Fintech with a social purpose
We’re keen, however, to differentiate ourselves from traditional lenders, but also from other fintech businesses, too. Our aim is to directly rectify personal debt and help build a stable financial position for the individual, or, ‘fintech with a social purpose’, as we like to think of it. The fintech industry gets lots of positive press. My personal view is if it’s just different people making money then it doesn’t really add value. Fintech needs to have some social basis to it. That’s what we really champion.
Saving in the long-term
Employers are taking an increasingly more prominent role in their teams’ financial wellbeing; employees who are on top of their finances are more likely to be focussed on their primary roles at work, as they don’t have the cloud of debt hanging over them; an inevitable, unwelcome distraction. The ultimate goal is to not only get employees into a debt-free position, but to then go on to encourage saving towards a house, a car, a wedding; whatever the goal is. Employees who are saving towards a real, tangible goal are more likely to be motivated at work, as they are driven by ‘anticipatory happiness’.
SalaryFinance delivers a product which evolves over time, keeps up-to-date with market trends and technology, and can be tailored to the individual. We work with Benefex to provide unbeatable financial technology to help their clients’ employees solve their debt problems and save towards their futures. Benefex clients are able to access SalaryFinance’s services at no cost to them, as the technology is fully integrated into the RewardHub platform, meaning employees will be able to access SalaryFinance via the RewardHub portal.Taken from ‘Credit to the Organisation’ – an interview with Asesh Sarkar and Daniel Shakhani in Institute of Directors magazine.
Your employees may well benefit from consolidating their debts via their reward and benefits platform. If you’d like further information, give Benefex a call on 0844 963 0023.
Asesh is Co-Founder and Chief Executive of SalaryFinance
SalaryFinance is one of the UK's fastest-growing employee benefits. We bring deep expertise in financial technology to help employees to improve their financial health. If you'd like further information, why not take a look at their website.