By: Bryan Habana, head of business development at Earned Wage Access company, Paymenow

If 2021 has shown us anything, it is that the old ways of doing things cannot and will not continue. In South Africa, which has been beset by a number of difficult challenges, ranging from the Covid-19 pandemic to the world’s highest unemployment rate, household debt is spiralling out of control as previous jobs disappear and businesses close.

Several studies internationally have shown that stress over household debt is a major contributor to poor mental health. Recently, research by PwC showed that 54% of employees said money issues caused most of the stress in their lives and just over 35% said they spent three hours per week or more being distracted by their financial hassles.

Though the solutions to the country’s problems are challenging and complex, one of the crucial factors that lead to financial and emotional distress – being left with no option but to borrow at unfairly high interest rates – can be dealt with quite easily.

The solution of a responsible Earned Wage Access (EWA) sector is a relatively new entrant to the financial world, competing with micro lenders, payday loans and alternative loans that have held people to ransom for decades. Nearly unheard of even three years ago, the sector in South Africa is growing strongly and offering much needed financial relief. By having an alternative access to funds that has already been earned enables an opportunity to drive people away from irresponsible lending and avoidance of unnecessary loans to meet basic household expenses.

Earned wage access has the potential to not only change people’s relationships with money, it also provides the opportunity of advocating for responsible financial habits and begin a culture of saving where that was previously impossible.

Whilst the concept of earned wage access is more widely known and accepted on an international scale, it still remains a relatively new concept in Southern Africa and it was not a matter of plug and play into the South African market. In fact, when the first earned wage access solution Paymenow was introduced to the South African market, it was a completely unique and innovative model developed specifically for the Southern African economic environment.

A unique feature and first to market in the earned wage access space was the value-added service of financial education and gamification to teach employees better money handling habits so that they can improve their financial position.

Gamification as a term is not meant to trivialise what the app does. There are good, scientifically proven reasons for presenting financial education in this way. Access to earned wages without financial education is much less meaningful and effective in disrupting the payday debt cycle. Gamification simply means that engagement with employees to help them become more financially literate can be presented in a playful and varied format using games, contests and challenges. Using gamification principles, reward users with greater benefits, and reduced fees, as they improve their financial literacy.

Employees opting into the Paymenow service begin on a Green tier, with access to only 25% of the stipulated company wage access amount, and at standard Paymenow fees. This is designed to introduce the concept of early wage access in a controlled manner. Users are then incentivised to complete financial education and literacy modules, questionnaires and voluntary credit reports to shift money handling behaviour as they build a better personal finance profile. Users can then go on to rise through Bronze, Silver and Gold status, allowing them to access up to the full specified percentage – determined by their employer – of their earned wages. This process leverages the power of Big Data and works according to prescriptive triggers derived from Paymenow’s adaptive rules engine that encourages responsible use of wage advances.

Covid-19 has ushered all employees toward digital channels for doing just about everything. An app like Paymenow is positioned to put behavioural science and data science to work in helping South Africans improve their personal finances through gamification.

A 2017 US Federal Reserve project also ran pilot tests of games teaching consumers about debt management, savings and investment. The study found that users of the mobile game that provided challenges, digital badges for achievements and interactive messaging to encourage players saved an average of 25% more than their counterparts. The researchers found that video game conditions tended to increase participants’ confidence and knowledge compared with the baseline.

Counteracting emotional stress and providing financial education in a fun and engaging format is a win-win scenario for employee and employer, leading to higher and more prolonged engagement as well as lower staff turnover and absenteeism. Research by Accenture has shown that 65% of millennials want gamified learning experiences to help them improve their personal finance skills.

Paymenow recognises individual needs and goals and is designed to provide unique learning experiences for employees at any point of the financial literacy learning curve by providing easily digestible chunks of information at any one time. We have created learning modules that speak to all South Africans in scenarios and terms we understand.

Financial education is sorely lacking in South Africa and our household finance statistics reflect this. To involve employers in a collaborative system which delivers financial education is analogous to the provision of medical aid and preventive care benefits to employees, and the rationale is the same – a healthier population with an improved quality of life.

The pandemic has thrust employee wellbeing into the spotlight and financial wellness is a critical aspect of overall wellbeing. Companies that build reputations for promoting employee wellness and being great places to work will attract and retain top talent. Financial wellness support – just like medical support – will soon become an indispensable aspect of a company’s value proposition for employees as the country continues to rebuild its balance sheet post-Covid-19.

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