Digital payday lending?


#1

Ok, so I saw an article about this company: https://earnd.com/

I’m not one to shout down new ideas, but I am a bit concerned.

Unless I’m missing something, is this, or is this not now a digital payday lender integrated with payroll software, and is this or this not a scary financial option for people without sufficient financial education?

Even IF the employer picks up the tab for the software, the premise of the platform is still digital payday lending because people are being advanced money ahead of their normal payday.

No?

I’d love to hear others thoughts when they look at it.


#2

Hi @weeksy_j - understand your hesitation. Encouraging people to spend ahead of payday…isn’t this akin to encouraging spending & borrowing? Does it create debt? However, this is a long way from payday lending which has typically attracted high interest rates. So for people who were going to go for a typical payday loan, this is a lot better. Also, it only allows you to borrow up to 50% of your salary ahead of time (they call it encouraging ‘responsible spending’). But I agree that this is open to debate!!


#3

Agreed, but if I had my way payday lending would be outlawed.

It might just mean that employers need to be forced to move people onto weekly pay if pay cycle management is an issue?

Perhaps this is something that could be cleaned up with reforms to superannuation, single touch payroll etc. letting staff choose their pay packet periods.

I think my main concern is that products like earnd detach individuals even further from their spending and savings responsibilities, under the mantra of increased convenience, but money and personal finance shouldn’t be about convenience it should be about prudence.

Just my opinion though, what would I know! :laughing: :smile:


#4

I had a mate who (100 years ago) lived in a small country town where the workers would hand their money over to the publican on pay day to save themselves from spending it all at once. The publican would then only serve them as much drink as he thought they should have and would force them to spend it on a hot meal a day! There is an element whereby we need to protect ourselves from ourselves so I know what you mean…I remember Demi Moore in a movie playing someone who realised out she’d spent the next 4 paychecks in advance! However, there’s also cash smoothing…2 weeks as a payment period for example could be viable. Fine lines! :slightly_smiling_face:


#5

I totally agree with @weeksy_j.

There is currently this weird admiration of the success of Afterpay and other such services that don’t promote managing you finances responsibly,

There is a strong chance that if economy turns for the worse that admiration will turn to outrage and there will be a stench associated with these services.

I’m not sure Xinja could hand on heart say that promoting/offering these types of services would be in customers’ best interests. I would prefer Xinja take the high road and steer clear of any of these gimmicky type services that are not in the best interests of customers.


#6

@captainXinja I’d be ok if it was legally binding that workers could nominate their own. I hear what you’re saying though, sometimes individuals don’t actually know what makes sense without education and guidance.

Has Xinja thought about creating a Chief Personal Finance Officer… :thinking: to just be the person to ask - general advice only ofcourse, or a chatbot accordingly.


#7

@azzy I genuinely put buy now pay later apps up there with student loans/lending as the next big thing when we have market downturn for the services that people will be cranky with.


#8

Tricky area here - in that general advice is only useful to a point. However, focusing on being money mindful if genuinely helpful. Just statements of fact about where you money is going for example - eg" did you realise you spent x on taxis/rideshare last month?" when you might genuinely not have noticed the costs wracking up. I remember my mum saying “are you aware that you’ve just eaten 8 chocolate biscuits?”. I wasn’t - and it definitely made me think about healthy eating more!:ninja_emojis_pink_03:


#9

They claim they don’t charge interest and will only allow someone to borrow up to 50%. For some people I guess this is helpful, certainly better then a payday loan.

I probably wouldn’t use it.
I’m struggling to see how they could fund it at scale with money always going out and eventually coming back. . :man_shrugging:t4:


#10

Agree, as an early shareholder of Afterpay I recognise economic tightening as one of the first things which makes people not pay there afterpay bills.

A recession would decimate the loan book.
We will eventually have one.
I believe that Zip Money has a more predatory model, account fees, Interest and up to 30k available for some people to borrow, just an alternative to a credit card (which I also hate, have but hate)


#11

I think it will be interesting, they only have a 90 days lending model effectively, so the question is whether they can manage to wind down the book when delinquencies grow, but if they’re not lending then what are they doing?


#12

See, that’s the thing, nothing is truly free, the question is who is paying for it.

If it’s the business then effectively it’s an employee benefit, but if the business is paying for it you’re relying on them not costing it back into the cost of hiring / employing and paying individuals.


#13

Agree.

Most companies would probably cost it back into hiring / benefits cost.


#14

Yeah definitely be interesting to see how it performs under less than ideal economic circumstances. The industry is meant to be writing a code of conduct and I think Zip has tighter credit check policy’s.

They’ll both always be lending some money and earning an equivalent payback.