Peter Briffett, Wagestream CEO on the pros and cons of getting paid early

Good morning. Welcome to Good Money Guide. Today, we’re talking with Peter Briffett, the co-founder and CEO of Wagestream. We’re going to have a quick chat about what Wagestream does, who they do it for, why you should use it as an individual or a business, and find out a little bit about Peter and why he started the business. So Peter, thank you very much.

Thanks for inviting me on, Richard.

Well, no, it’s a pleasure. It’s lovely to meet you. Shall we start by you just telling us a little bit about Wagestream? What is it? And who is it for?

So Wagestream allows any worker, any employee of any company to be able to get paid whenever they want. So we give them access to their earnings. Really important, they have to have earnt the money, but what they’re able to do with our technology is access they money they’ve earned between pay cycles. And the whole premise of the business was if we could give that liquidity back to workers that normally, people get paid monthly, so therefore, they’re locked out of their earnings for a 30-day period. If we could give them back that liquidity then would we be able to prevent them incurring overdraft fees or credit card debt, or the worst thing anyone could ever do is payday loans. So that was how we originally looked at it.

And this isn’t your first business.

It’s not first business. Look at me, I’m obviously old and battered from too many startups. But yeah, I’ve been involved with tech from an early age really, just simply because when I got my first job, I just lucked into a fast-growth technology company, had no idea what it was doing. It was just paying more than anyone else. I think that’s probably why I did it. And as a result of that, I’ve always… you know, just got into your blood really about how can you sort of use technology, you know, to build these type of marketplace models and if you can drive benefits on both sides, is that going to be something that, you know, is interesting to do.

And so this is your first business as a founder. Have you always stepped in at an executive level before, and is the first one you’ve founded?

Yeah. I had another one we ended up selling to Microsoft, but yeah, we founded this with the sole premise of this is something we really felt strongly around, a social impact piece. This seemed to be unfair to us that lower income workers, shift workers were being punished by pay cycles, and was technology available for us to do something about that. But yeah, founding it from the beginning, yeah, normally, I’m parachuted in or I’ll go in at a level. But yeah, this has been a really interesting two years.

Is it a big difference? Is it your baby rather than, you know?

I guess it’s more stressful because there’s a lot of other things you’ve got to do, rather than just run the business. You’re obviously responsible for all the recruitment, for raising money, for making sure the business is going to have a future. So yeah, I guess things keep you up at night. But on the other side of the coin, extremely empowering when things are going right. But you have to put up with all the emotional rollercoaster of not every day is built the same basically.

So we’ll touch on why it’s good for individuals and why it’s good for businesses in a moment, but you’ve just mentioned raising money, and I read that you’ve had the Amazon founded Jeff Bezos and Bill Gates invest in. How did you get in touch with them?

Well early on, we went to a fund called [Ascension] Ventures, and we have got a social charter with Joseph Rowntree, Barrett, Cadbury. That was really important for our foundation stones. And we also got investment from a fund in the US called Village Global, and their LPs are Bill Gates, Jeff Bezos, Mark Zuckerberg, who were looking for social impact type of investments. No, it’s great to have them.

So good business…

Yeah, absolutely. And this is just the trend coming through, which is great, which is, you know, either high net worths or even funds now are looking for the impact of their investments. It’s not just about pure profit – I give you X, I want X back. It’s about what is that money actually going to materially do to either societies or the environment, that type of thing? So it’s great those questions are being asked, which means for a social impact business like this, there’s obviously more access to funds than there probably was ten years ago.

So let’s just talk about the pros of cons of people using it. Obviously the pro is that if you’ve earned money, you can withdraw it before the month end, so if you’ve got bills coming up, you can take it out. But then the con of course, the disadvantage is that… you know, you’ve been asked this to death, is that will people get into a cycle of early withdrawal?

Yeah, I mean it’s a totally legitimate question. I think when we first started, oh, money on an app, must be a loan, but obviously, we’re matching financial data with workplace management data, so we know every minute of every day how much someone earns. And then the secondary question is actually, yeah, like you rightly say is could this be dangerous, will it be misused, will people get into a cycle of misuse. I guess the best answer to that is something we’ve learnt as we’ve sort of got over 200,000 users on the platform now, using Wagestream, is people, once they realise it’s their money, it’s their actual money they’ve earnt, they’re far more responsible with it than they would be if they get a bigger credit limit on their credit card or overdraft fees, which illogically, people may see as free money. So when we look at our user base now, it’s pretty standard month on month. It’s no more than really 8% that’s drawn out of your complete income. So the average usage of enrolled users is probably twice a month. The average draw-down’s about £70. So it’s being used for exactly the right reasons.

So we have an app that people use. They can access their earnings. But on the other side, the employer, who we work with, can set the percentage their staff can take, the amount of times the staff can use it.

So they can’t take all their wages as soon as want it?

Correct. So most companies will set the bar at about 40% of my earnings. So of course you want people to have money at the end of the month, of course you want them to be able to cover their bills, but conversely, what you don’t want is them falling into debt between pay cycles.

So yeah, the usage patterns show that actually, it’s not being misused at all and it’s incredibly powerful for people to actually choose when they use their money, rather than go into debt.

For those of you watching, it’s the 30th of January, so everyone is skint. So people who were paid six weeks ago have spent all of their money at Christmas. So has it been particularly busy?

Obviously, this is the longest pay cycle for many people, because a lot of companies pay before Christmas, doing the right thing to try and give their staff an early pay day at Christmas because it’s a very expensive month. But then you’ve got this six-week period where people don’t get paid. But we see, month on month, the usage figures are really consistent. 41% I think of people’s pay is normally spent in the first 24 hours, and that’s because you’ve got your direct debits, your mortgage payments or whatever else, it’s coming out of your account. And then your sort of cash flow positions tends to go down throughout the month. And we see, with Wagestream, that yeah, about 40% of our usage is in the last seven days before people get paid, because that’s the critical week when people have the worst financial health, and that’s when they tend to run out of money, and that’s when they could fall into the hands of predatory lenders. So that’s where we see most usage, which is exactly in line with actually people’s liquidity and cash flow position.

Well the payday loan industry, for instance, I mean that’s going through a hell of a time at the moment. I mean they are all on the way out.

It’s great. It’s being systematically destroyed really by regulation. I mean we always claim, you know, we always set up our stall to, you know, destroy the payday loan industry. When Wonga went under when we first launched, we went across Millennial Bridge with a mock funeral procession to celebrate that. But yeah, very much around regulation and they’ve obviously been fined by the Financial Ombudsman to the point where a lot of them [aren’t] trading. So it’s great that that business is going out. But that business is only there because people are suffering from cash flow issues and pay cycles. The whole concept of a payday loan was I’ve run out of money; I need money before I next get paid.

I mean it’s part of life. Everybody will always run out of money at some point, no matter how you earn.

Exactly. Although it didn’t exist when people were paid daily. It’s only existed as pay cycles have got longer, or the need for them has existed more. And that’s something, when you access your earnings, you don’t have to fall into debit. It’s actually a huge advantage long-term for your financial health.

I mean the gig economy, it’s becoming more and more popular, with all of the sort of big megabrands, but for everybody, for you know, standard, say medical, NHS workers, people working in finance in city, people working in accountancy, do you think it’s going to become the norm?

So the only company we know that’s built [with] themselves is Uber, because they had to have a mechanism that they could pay their drivers daily, because it’s all about the supply and demand dynamic.

Yeah, but I think if you’re a gig worker, you should absolutely be paid instantly.

Exactly. And it was fundamental for their model that they had a sort of instant pay mechanism. We think this will happen everywhere. Gartner thinks by, you know, certainly in the US, by 2023, 25% of the US workforce will have access to some sort of flexible pay tool.

What’s really interesting with things like the NHS, we’re actually doing a lot of work with Trusts now. Most Trusts have a horrible time resources, just on a daily, weekly basis for staff. You know, unsociable hours shifts like Saturday night, can they use a flexible pay model to encourage workers to do shifts they ordinarily wouldn’t have done because they can have instant access to that money? And we’re seeing that in certainly security, facilities management, where people are saying okay, you can have 40% of your income normally but if you do an overtime shift, you can have 80% of that. Will that encourage my staff to do more shifts? Turns out it does.

So generally, if you’re an individual, you can take up to 40% of your salary when you’ve earned it, and what would that cost the user?

So every time an employee does a withdrawal, it costs £1.75. Whether they take £1,000, £100, it’s like an ATM charge. But interestingly, we also charge the company for allowing their staff to use Wagestream, and that’s just a set fee. But we are seeing more and more companies now pay for the transfers for their staff. And we believe over time, you know, if you are an organisation, you’ve provided a flexible pay product, you are getting the benefits of better staff retention, your staff are doing more hours, it’s easier for you to manage the workforce, then they should pay for everything. So our goal is to push all the cost onto the employer.

No, absolutely. Keep your workers happy and they’ll stay longer.

Absolutely. And it’s about staff engagement, it’s about workplace sustainability. And if this is a great tool to leverage that, then it’s really important. I mean we do a lot of work with large organisations, and you realise in a lot of cases, the most positive thing they do to their staff is pay them. They have a range of other benefits. You can give people yoga classes, free fruit, but if you don’t pay them, I’m not sure those other benefits would be so appealing.

I worked for a company once where we all had free lunches. So we had a free three-course meal for lunch every day. So we all thought we were treated really well, but they’d have a camera on the queue to the cafeteria, so you could look at the office intranet and see how long the queue was. And everyone was like this is brilliant, this is brilliant, but if you looked at everybody, everybody was downstairs, got their lunch and back up eating it within about three to five minutes. There was no going out to Pret to get a sandwich. So it was quite sort of sinister. I mean the company unfortunately has gone bust now.

Too many lunches.

Yeah. It would’ve been interesting to see how much productivity was gained by giving people a free lunch and letting them see that they could get it instantly so they’re back upstairs working, rather than…

Definitely. There’s probably something there. But I guess what I’m saying, benefits are benefits but pay’s the biggest one. So if a company can be more flexible with that pay and make it even a bigger benefit to staff then you’re going to get a natural bond between employer and employee that we think we can see.

So how long have you been going now?

We started the company in January 2018.

2018. So do you have many stats on companies that have increased employee retention?

Yeah. We’ve proven it now with a large restaurant chain of over 8,000 workers, and a large gym chain that, you know, looking at four years of seasonal attrition data, because they go through sort of seasonal cycles of losing staff and bringing staff on, that when they launched Wagestream, certainly with the restaurant, they’ve lost 16% less staff over the period of the last 12 months as a result of having this. So it’s really compelling. And if you are in a retail or hospitality business with a lot of transient workforce and a lot of staff churn, even a single digit percentage increasing your retention rate of staff is hugely beneficial from a cost perspective.

So I had a quick look at your website. So you sit in between the company and the employee. So payroll goes to you and then…

Yeah. Basically, on a very high level, and it is a very simple model really, we access workforce management data, which is held at the company. So I can understand all the rotas and scheduling and how many hours and how many days everyone’s worked. We show workers in real-time how much they’re earning, how much they could earn in the future, because we can see into the rotas. We don’t touch a payroll process but we have quite a smart way of building a solution, is we just put in a ledger account in a payroll file, so your net pay’s going through us into your normal Barclays, NatWest, Santander account. And as it goes through, if you have taken money out between pay cycles, then we can recover it, just in that millisecond before it enters your account. That’s been really important because I think if we were part of a payroll process, you know, we’d be a deduction on a payslip and therefore, you wouldn’t be able to use Wagestream that last week of that month, and that’s the critical week in a monthly pay cycle when most people have the most need for a product like this.

So individuals get their money from you, rather than the business?

Yeah, exactly. So we support all the payments ourselves. We’re EMA regulated, so we’re able to push that money on behalf of the employer. So you work at Carluccio’s or BUPA or Rentokil, it comes into your account with your employer’s name, just like your pay does, but we’ve originated the funds for that. Because one of the reasons that people in the UK are paid monthly, and by the way, in the US, everyone’s paid every two weeks.

Yeah. I used to work in the US. It was brilliant, yeah.

Yeah. Whether you’re Donald Trump or work in a restaurant, everyone gets paid every two weeks. I think there would be riots if people were paid monthly. But in the UK, people are paid monthly, 85% of people are paid monthly, because a) cash flow reasons – the companies would prefer to keep the cash longer, but more importantly, really, it’s about admin as well. It’s hugely complex to run payroll and expensive. So the less times they can do it, the better.

And just a final question about the business before we sort of move on to yourself. How are you protected? So obviously, you’ve advanced a lot of money to individuals and then a big company, it’s not unreasonable for a big company to go bust. What happens if a company goes bust?

Well that’s a great question. I mean our risk as a business is that company goes into insolvency between pay cycles. So it’s a risk we take seriously and we obviously credit check. We’ve got a whole compliance team. But the reality is it’s a very rare event. Obviously, every time an organisation pays their staff, we’re recovering the funds. Even in insolvency cases like Carillion or Thomas Cook, which I can think about for the last 12 months, they always still pay their staff, at least for that last month. So we’re probably in a very low-risk position. And it’s also why we do a lot of work with the public sector – they are zero risk. I mean if an NHS Trust or a council goes under, we’ve got bigger problems then.

So let’s just talk about your time at the business. What’s been the best part of running it so far? What have you been most proud of, setting up from the beginning?

Yeah. We work very quickly; we get product to market very quickly. I think what the whole company loves is the feedback you get from both employers and employees. I mean AppStore ratings, people feeding back to them, “This really saved me this week. I managed to get to work” or “I could buy…” I mean these things are great to see. You hope that it would be taken positively, but I think the feedback we get is probably some of the best things we see, because you know you’re making a difference, and that’s what it was set up to do. Our challenge of course is getting it into the hands of more companies. That’s what we spend a long time trying to figure out how to do more efficiently.

How have you found compliance and the regulatory position?

No, it’s my first fintech company so I’ve never had the sort of compliance, regulatory lens on.

But you’re the first mover in this industry.

Yeah, absolutely. There’s a lot of companies doing similar things in the US. There’s a lot more competition coming over here. And that’s great because obviously, the whole markets get educated on the space. We’re definitely the first mover over here. I mean look, this is not a loan. There’s no form of credit. We’re FCA authorised to move money. We spent a lot of time with the FCA, talking through the model, what we’re doing. You have to go through those hurdles. But yeah, it’s not regulated because you’re not loaning.

So final question, obviously your business enables early access to people’s money, but in terms of financial education, is there any sort of services that you’ve come across in your lifetime or throughout the course of business that you think can help people be better at managing their own money? You know, doesn’t matter how much money you’ve got – everybody needs to be better.

Everyone needs help, and like we were saying, no one gets taught this stuff at school, so we’re got a financial educational tool in the app. We’re constantly trying to improve it. We rely on content from great organisations. You know, Money Advice Service, Money Charity, Good Money Guide – all these places are great places to go and get good advice and comparisons and try and give you the right information. I’ve forgotten the podcast but So Money is a great podcast as well about that. I think Open Up as well is another great book on money. We definitely find there is a stigma for people talking about money. It’s probably even worse for English people that have even more, you know, stigmatised about things. But it’s definitely been the case that giving people access to their income has created some different behaviours that wouldn’t exist if they had to go and ask their employer for it. So giving people that freedom with money does definitely mean that they act differently. And I think the educational piece around that is something we’re always looking to evolve, yeah.

Well that’s interesting. I was recommended a book the other day called Happy Money. Have you heard of that?

Oh good, no, sounds good.

It’s brilliant. It was another interview we did with a wealth manager, and it’s all about how to enjoy spending money, but not like excessively. It’s all about to sort of treat everything as a treat.

Yeah, that’s interesting.

And fun.

It’s definitely true that, you know, what you’re trying to do is stop people hiding bills under the carpet, addressing the money issues. We’ve just found one of our… you know, obviously, people can stream their income but actually, the core feature people go back to again and again in the app is just tracking their wages, understanding what they’ve earnt and what they’re going to earn this month, that visibility’s been really helpful for people to help them understand and manage things.

I suppose actually with open banking coming in…

We have open banking, so we can say to people now, hey, we can see you’ve got an outgoing in two weeks’ time. It’s a Vodafone bill. We’ve taken the liberty of booking you another shift in the rota. Let’s call that the Vodafone shift – take that and you’ve paid that bill. Your financial picture in two weeks will be better. So I think those are the really compelling things you can start to do.

So that’s brilliant actually. If you can pre-empt issues. So if you know that you’ve got a direct debit coming out, say it’s a quarterly direct debit that you’ve perhaps not noticed for the last two months, then I mean that’s brilliant, because if that bounces, I mean that’s quite detrimental to your credit limit, isn’t it?

Yeah, exactly. That’s absolutely right. So whereas a lot of neobanks, they’ve got great interfaces, they’re really good at categorising your previous spend, what we’re trying to do is say okay, let’s do that but let’s also show you what your financial picture’s going to be like in a couple of weeks’ time. If you don’t like it, let’s try and work out a way you can improve it.

So you can tell people if you don’t work three extra shifts, you’re going to run out of money?

Absolutely, because we realise when we connect all these rotas and all these APIs that we don’t just see what people have earnt but we can see their capacity to earn in the future. And it’s that data that can be incredibly powerful to someone. Knowing what they’re going to end up as at the end of the month, will you make a different decision now? In most cases, yes.

Brilliant. Well Peter, thank you very much for talking to the Good Money Guide today.

Thanks for inviting me.

Thank you very much for watching this episode of Good Money Guide TV. We’ll be back shortly with another business to look at. Thank you.