My name is Simon Ellis and I am a co-founder at SmartWage. Today I want to talk about South Africa’s huge debt problem, and how SmartWage is working with companies to eliminate the payday debt cycle amongst workers during the lockdown.
One Hundred and Forty Billion Rand
This is how much the South African workforce is borrowing from their companies by the 25th of each month, just before they get paid at month-end. And they are getting this money from their employers at zero interest.
South Africa has a huge debt problem with most people living hand to mouth. Many employees are struggling to make ends meet and rely on predatory payday lenders or loan sharks to cover any shortfall in cash. If only they could easily and cheaply access the money they have already earned during the month, they would be able to avoid these high-interest rates and fees. This problem is hugely exacerbated by the lockdown and all the struggles that go with it, with many people having to make especially difficult financial decisions to survive the crisis. We all need all the help we can get to plan responsibly and manage our personal finances securely.
What is the SmartWage Advance Service?
The principle of the SmartWage Advance service is simple. If you worked today, you should be able to get paid today. 100 years ago people were paid at the end of every day. Slowly it shifted to weekly, then fortnightly, then monthly. There are good reasons for this: People have month-end bills and taxes to pay. However, a big chunk of spending is every day. There are also frustrating reasons: Payroll is a pain to organise and run, salary advances are even more of a pain, employers don’t want to have to do it too often, and some companies rely on holding this cash to balance the books.
Either way though, getting paid is almost the only thing in the world that has actually become slower over the past 100 years!
How SmartWage is eliminating the payday debt cycle by reducing consumer debt
SmartWage solves this problem in a way that works well for employees and employers. Employees can access up to 50% of the cash they have earned so far that month, for a small transaction fee. They also get to see how much they earn each day, improving the correlation between work and pay – something lost in a monthly pay cycle. Employers still pay at month-end, but they have happier employees, higher uptake of additional shifts, and higher retention. Best of all, integration is really simple.
The proposition is simple. Change the way employees are paid to increase financial wellness.
The question we ask ourselves as a team is if we can build a real competitive advantage and if we have the right attitude and skills to make this happen. The answer is not easy.
The progress we have made tackling consumer debt and growing the SmartWage business
We are executing fast. SmartWage is only five months old, but we’ve made amazing progress. We have signed up more than 24 employers who together employ more than 6,900 people. What we’re doing is not easy and we haven’t got it right just yet, but we’re getting there. We need to provide employers with a low-tech, easily accessible solution that can scale across South Africa and Africa and handle complex and sensitive financial data, integrate smoothly with companies, and find partners who can fund a large balance sheet.
At Smartwage we are always looking for ways to use innovation in financial services to expand our financial services offering and drive systematic changes in the credit market.
We are committed to eliminating the dependency that South African’s have on pricey credit. What challenges have you had accessing and using credit and what impact has this had on your overall wellness in the workplace?
Let me hear what you have to say in the comment section.