By Bryan Habana
We live in a world where we have become accustomed to instant gratification. Be it food delivery services, groceries or even online shopping, we are used to being able to get what we want when we want it – at the click of a button. This can lead the youth into making some bad financial decisions.
It can be tempting to make use of the plethora of payday loans on the market or incur credit card debt for those end of month essentials, or a good deal that will be over by the time the next pay-cheque arrives.
These credit facilities often come at exorbitant interest rates, and this leads to many young professionals and new entrants in the job market, falling into a debt cycle that can be expensive and take a lifetime to escape.
Coupled with the rising price of petrol, food and overall cost of living, it’s easy to understand why more consumers are turning to these credit cards, high-interest personal loans and unsecured lenders to make it to pay day.
Most people spend their entire pay check by the 6th of the month. That equates to just five days for South Africans in the middle-income group to spend 80% of their salaries – leaving the remaining 20% to be stretched until the end of the month. The reality for minimum-wage, blue-collar workers is even more dire.
Research shows that even though seven out of eight working-class people have a bank account, only one in eight is granted access to a credit card – leaving the remaining population desperate to borrow from informal lenders or loan sharks, often at the expense of high-interest rates.
According to a report by KPMG, even before the impact of Covid-19 on economies, employees were already struggling to keep up.
Living from pay-cheque to pay-cheque was not even a feasible or reliable option. The solution to this almost daily struggle is early access to already earned wages.
Earned Wage Access (EWA) platforms, like Paymenow, allow companies to offer employees access to the wages they have already earned ahead of their pay day cycle.
This B2B model has been designed to empower employees to take control of their finances and migrate from indebtedness – altering a vicious debt cycle into a savings mindset.
However, it’s not enough for EWA platforms to just offer access, it’s crucial to also promote responsible financial behaviour and encourage saving.
A Southern Africa Labour and Development Research Unit report suggests that the majority of South Africans aren’t financially literate – this means there’s a desperate need to provide basic and practical lessons.
The challenge is to find a way to offer this content in an inclusive manner that makes the most sense for users in a country where there are 11 different languages across many different standards of living.
According to the European Commission, gamification is one of the most efficient and constructive ways to go about it. By gamifying content, users will be able to improve their financial literacy and become better at making smarter money-related decisions while enjoying game play.
Paymenow teaches users basic financial principles, like how to budget effectively, read a credit score and build credit appropriately, and how to manage savings, through a gamification approach.
Users can unlock greater percentages of their earned wages by passing certain levels of financial literacy training, in an innovative and interactive way.
While some of these lessons might seem very rudimentary, there are many people who have never had the privilege of learning said information, let alone embarking on a financial wellness journey.
Over the last two years, our users have shown as much as 60% improvement in their credit score compared to the general South African population. This phenomenal result is a testament to the massive positive impact that EWA, a reliable alternative to credit, can make to employees.
Using technology to gamify financial education, and give people access to their hard-earned wages, employers can play a crucial role in turning their employees into financially resilient citizens.
Bryan Habana is the former Springbok rugby player and Chief Commercial Officer at Paymenow.