SalaryFinance: a fintech company with social purpose
Household debt is at its highest since the 2008 crash, with middle and low-income earners hardest hit. The founders of SalaryFinance explain why consolidating employee debt at a low fixed rate and deducting it from payroll could make good business sense
At the start of this year, the TUC issued a stark warning. Household debt proportionate to income was at its highest since 2008. Citing data from the ONS, the TUC said the average UK household owed £11,800 – 26.5 per cent – of its annual income on credit cards and loans, including student loans but not mortgages, in the third quarter of 2015. This echoed Bank of England figures for November showing unsecured debt of £2,759 per household, excluding student loans.
Why should that matter to employers? It doesn’t take a genius to realise that such levels of debt could have an adverse effect on an employee’s wellbeing. But how many business leaders are aware of their staff’s financial health? Very few, according to a survey by Close Brothers Asset Management, which found that under half of employers do not have a wellbeing strategy in place and, of those that do, only a quarter have considered specifically addressing finance.
Step forward former banking consultant Asesh Sarkar and his SalaryFinance co-founders (entrepreneur Daniel Shakhani and ex-Google UK boss Dan Cobley), who aim to rectify this. Describing itself as ‘fintech with social purpose’, SalaryFinance’s business model is to consolidate employees’ debt into a single loan (up to 20 per cent of their annual income) with a fixed 7.9 APR, paid off in instalments through the employer’s payroll system.
The idea came when Sarkar learnt his children’s nanny was paying a “significant” portion of her salary on high-cost debt repayments. With $6.1m (£4.5m) from Cobley’s Brightbridge Ventures (a VC subsidiary of Blenheim Chalcot), SalaryFinance was born. “I was surprised that I could get a very low-interest rate loan, yet someone who worked for me wasn’t able to,” he says.
