Asia-focused technology venture capital firm Fatfish Group (ASX: FFG) is poised to enter the burgeoning earned wage access (EWA) sector with the $4.14 million acquisition of Australian digital financing company BNPL Next Limited.
BNPL Next owns 60% of salary-on-demand service provider Circopay and has a two-year option to purchase the remaining 40%.
Circopay is an early mover in the global EWA space with customers in South East Asia and Australia.
The 60% equity awaiting Fatfish on completion of the transaction will complement its strategy to invest in emerging technology trends in digital financing needs.
It will also fit with the group’s plans to rollout buy now pay later (BNPL) services across South East Asia.
Circopay helps employees access their money as they earn it to meet the raft of short-term financial requirements (such as school payments, medical emergencies or holidays) which can arise between paychecks.
The solution reduces the need for individuals to turn to high-cost “debt trap” products such as credit cards, personal loans or payday loans.
The company has pioneered the concept in South East Asia, where a large proportion of the working population have comparatively lower incomes as well as limited access to financial services.
In Australia, Circopay has secured a partnership with PayGroup (ASX: PYG) which gives it access to over 5 million employee payslips from more than 1,000 employers including the Victorian government, Westpac (ASX: WBC), Electrolux and Volvo Group.
Since its founding, Circopay has raised $976,000 in funding and has secured a $5 million credit line to facilitate its EWA services.
According to research by credit company Visa, many people around the world live from paycheck to paycheck and struggle to manage their personal finances.
In the United States, around 44% of employees have less than US$500 (A$640) saved for unexpected expenses, and 80% of employees spend time at work thinking about or dealing with personal finances each week.
The COVID-19 pandemic has exacerbated the problem by forcing organisations to retrench their employees or cut their working hours.
Service industry majors such as Walmart, Uber, McDonalds and Domino’s have all adopted some form of EWA program to improve employee financial wellness.
Due to its “win-win” nature for companies and individuals, Fatfish believes in the near future, EWA and faster payroll options will become “table stakes employee benefits” for many businesses.