Many of us have had to, at some stage in our lives, have difficult conversations with loved ones, friends,colleagues and even our bosses.
Breaking up with a lover, asking for a raise or even borrowing money leaves us squirming and often putting off the inevitable. Fear no more. A new borrowing app will make having these uncomfortable conversations much easier. Floatpays was launched in January and has already been integrated with more than 25 companies offering the platform to almost 10 000 employees and growing fast.
According to the Reserve Bank South Africans spend 72.80% of their gross income on paying off debt. A recent TymeBank survey suggests that 76% of South Africans do not make it through the month with their salaries. The TymeBank survey also also shows that more than 40% of South Africans spend between 41% and 100% of their income on paying off debts.
Floatpays’ CEO Simon Ward said if you take the aforementioned statistics into account factoring in the low levels of household savings for South Africans, employees are left with a tough choice. Don’t pay household bills and expenses, risk being blacklisted for not paying existing credit, sacrifice on putting food on the table or take out a short-term, high interest loan to help me get by. For many employees, the latter is the only viable option.
“An increasing number of South Africans are borrowing money to put food on the table or to cover unexpected expenses. The percentage of loans obtained from financial institutions from 2019 to 2020 have more than doubled from 21% to 43%. The percentage of loans obtained from micro-lenders also more than doubled from 5% to 12%. There are now more than 40 000 informal lenders operating in South Africa. High interest loans are creating cycles of debt employees are hard pushed to climb back out of,” he said.
But how does borrowing money against your salary benefit you? Ward said it’s not a question of will people be short at the end of the next month, as more than 70% will be borrowing money regardless.
“The question is how can we ensure that people aren’t exploited by high interest credit solutions, but rather how can we provide them with a socially impactful and responsible alternative. Floatpays offer employees access to a percentage of their earned, but unpaid wages at a small once-off fee. Users don’t have the risk of adding debt. We move employees towards financial self-reliance. We help employees avoid debt-traps. We charge no interest, there are no hidden fees and no late repayment penalties. There is no lure or pressure to access wages via Floatpays. Employees can only access funds for time worked. Rules are available to limit access to all earned funds. The default is 25%,”said Ward.
To put that in perspective, person X needs access to R2 000 in cash for a household emergency. Through Floatpays, to access R2 000 of their already earned wages would cost them a once-off fee of R43. If that person had to make use of a micro-lender, that would amount to R457 with interest accruing for each day if the loan is late. Should they have been blacklisted or not have the correct documentation, these people would have to resort to using an informal lender, there that amount would be significantly higher.
“We stop employees needing to borrow money with high interest credit solutions like using a credit card, dipping into an overdraft, personal loan (formal or informal) when needed for financial assistance. We provide access to a percentage of your earned wages either as cash, or as a critical care voucher like NetcarePlus GP Vouchers, mobile data or airtime or prepaid electricity with no transaction fee or mark-up on the cost you would normally pay. If you have money in your bank account earning interest, leave it there and accrue interest, while your wage access platform is used for buying those essential vouchers, remember no fees on vouchers,” he said.
Ward adds that once you’ve had the money conversation, ending a relationship, another difficult conversation, may just be a little easier.
For more information, visit Floatpays.