Hi55 Ventures talks about early payroll access technology
Trade finance continues to evolve as a tool designed to meet the cash flow needs of both ends of a B2B transaction. Business buyers can ensure invoices are paid without releasing working capital, while suppliers’ own cash flow is supported by timely invoice payments.
But accounts payable (AP) are not the only way out of capital for businesses. Among the heaviest – and yet the most important – is pay, a workflow that Hi55 Ventures‘CEO and founder David Brown said is basically broken.
Historically, employers have deployed the old payroll strategy of disbursement salaries to employees on a fortnightly or monthly basis, a schedule that supports their own working capital needs. But too many employees are living paycheck to paycheck, with costly consequences, as Brown told PYMNTS in an interview.
He discussed the development of Hi55 Ventures Hi, a FinTech that aims to adopt a new approach to payroll by placing the financial well-being of employees at the center. The key, he explained, is not only to transform the way employees get paid, but also to transform the way they pay.
A working capital challenge
The pandemic has highlighted how difficult it is for employers to manage working capital in a way that ensures employees are paid.
“You have the employer who has to find huge amounts of working capital to do payroll,” Brown said. “The pandemic has shown us how difficult it is because if the government never made a commitment to finance the payroll, hundreds of millions of people would be unemployed because no one had working capital to finance it. payroll.”
In the UK, where Hi55 Ventures is based, the company’s own research found that up to 70% of employees experience it. financial strains – and about half of that figure attributes that strain to difficulty making their own payments between pay cycles.
Hi entered the market in an attempt to solve this two-sided problem. Taking a page from the trade finance model, the company created a new asset class (which Brown said was an unintentional discovery) called Pay Asset Finance. The solution unlocks working capital for employers, allowing businesses to pay workers on a weekly or daily basis, while they themselves can defer payroll payments for up to 12 weeks.
Promote employee well-being
According to Brown, Hi’s business model not only aims to address the cash flow challenge for employers and employees, but it intends to challenge the recent emergence of an alternative business model similarly designed to connect professionals. to the salaries faster.
FinTechs that offer access to early or on-demand wages, Brown said, often charge the worker to receive those funds. As a result, these solutions that aim to alleviate the cash flow burden on workers can actually create new problems.
Charging an employee for access to their earned wages is “fundamentally wrong,” he said, “because it’s not their fault that payroll isn’t working – it’s actually their fault. of the employer. Why charge the employee with a debt that is owed to him? “
With large employers being able to secure better financing rates than their individual employees, it makes sense to ease that financial burden on the worker, he added. Hi aims to bring this business model globally, announcing the continuation of the A series financing round to facilitate expansion across Europe as well as the United States, where the company will take a card-based approach to connect professionals to their pay more quickly.
The goal, Brown noted, is not simply to change the way employees are paid. Rather, there is a catalytic effect of building employee cash flow without imposing a working capital burden on the employer. Brown highlighted the possibilities for professionals to make significant savings on their debts by paying off credit cards or mortgages more frequently, a direct result of faster access to wages.
“If you can change the way you get paid, then you can change the way you pay,” he said.