Second Tap: Wagestream ‘How to build financial resilience’

The time flies, and there it is the story of the second startup; Wagestream.

About Wagestream

Wagestream is an English financial services startup that allows employees to stream their earned wages into their accounts through an instant app. In other words, it lets you get paid whenever you want. By this way, it aims for employees to have power over their pay to transform their financial lives. It also helps employees to avoid turning to high-cost, short term credit when they need urgent cash. It gives employees the ability to instantly access, track, save and manage their earned wages.

The research shows that 55% of UK families cannot afford an unplanned expense of £250. Basically Wagestream is going to change this number by making cash available right after the work finishes. The Wagestream has clients such as George Llloyd Clubs (gym chain), Leon (restaurant chain), Brewdog (pub chain), etc. Their client base includes sectors with shift work as they employ the bottom of the income pyramide which is more vulnerable to economic shocks. Wagestream aims at these companies on purpose so that their employees can be more resilient to these shocks. This is another reason to love the idea behind the Wagestream! It is no wonder that Joseph Rowntree Foundation, an independent social change organisation working to solve UK poverty, backs Wagestream.

Moreover, it lets employees achieve their saving goals. For example, you want to save £100 by June because of your mother’s birthday. It puts aside that amount for you from your salary. In a way, it acts like a payment and saving assistant for its users and payroll assistant for the clients.

Another aspect of Wagestream is that it may help the companies’ HR organizations to become more efficient. For example, think about a company giving a £100 gift card to their employees for furniture needs. Yet, the ratio of using this gift card is low due to the fact that the furniture store has items at least £500 and the employees cannot afford to spend £400 on furniture. Here, the Wagestream will make its magic and use the data to advise more effective side benefits to the company. For example, it will analyze that the employees are usually claiming their earned wages in mid-September to spend it on their children’s school expenses. Wagestream will advise this company to offer a gift card for school expenses instead of furniture expenses. Sure, Wagestream is not at that point in terms of data collection and maturity, yet it is on its way.

The Business Model

The startup’s business model is shown in the below figure.

At this point, it is important to mention that there are other applications like Wagestream. Yet, their business model structures are different. The others put more burden on the employees or they are taking a license fee per withdrawal or on a yearly basis. As I have heard in an interview with Peter Briffet, co-founder of Wagestream, he mentioned that the more Wagestream has clients, it will lower the transaction cost taken from the employees.

The Sector

Wagestream operates in the fintech sector which refers to computer programs and other modern technologies used by businesses that provide automated and improved financial services. According to Deloitte’s report, global Fintech revenues in 2018 were about €92 billion and are expected to grow to more than €188 billion in 2024 (pre-COVID-19 forecast). 44% of the fintechs in Europe originate from the UK in 2020. It makes the UK a hub for fintechs along with Germany and Spain.

Report also shows that there was a steady increase in the invested capital for Americas and EMEA throughout the 2016–2019 period. In 2020, there is a particular decline due to the coronavirus in Fintech deal activity in the EMEA region. The total capital invested declined to €10 Billion from €65 Billion. Yet, some believe that Covid-19 will greatly accelerate the so-called “fintech revolution”. Because, the pandemic has evidently encouraged many more consumers and businesses to use digital solutions in place of traditional offline processes; a trend that will not be reversed even if the virus is brought under control.

The Competition

There are other platforms like Wagestream such as;

• Square: San Francisco based startup founded in 2009. The app was co-founded by Jack Dorsey who is also the founder of twitter. Upfront payment service is one of the services it offers along with customer engagement platforms, e-commerce tools, etc. Its most important product is Square Reader which accepts credit card payments by connecting to a mobile device’s audio jack. It has been traded as a public company on the NYSE since November 2015.
• GajiGesa: Indonesian based startup founded in 2020 provides earned wage access to employees like Wagestream. When a worker withdraws money, GajiGesa asks why they are using the Earned Wage Access feature, and presents that data to companies in an anonymized and aggregated format.
• Vui App: Vietnamese startup founded in 2020 lets workers in Vietnam access their earned wages immediately through its app called VUI. The app usually fronts wage advances, and then is paid back by employers on their paydays through payroll deduction.

It is good to see GajiGesa and Vui in emerging markets where they are mostly needed by the shift workers. I also expect them to grow over time with investments from VCs and the sector to have M&A activities as there are several startups of all sizes.

The Team

Wagestream is founded by Peter Briffett and Portman Wills. Peter Briffett is a serial entrepreneur. His startup iView was sold to Microsoft in 2007. His second startup after iView, Gissing, was sold to Thomson Reuters in 2009. After these successful exits, he worked for several startups and in 2018, launched the Wagestream with Portman Wills who is a serial entrepreneur like him. Wills co-founded ‘Join the Company’ which was then acquired by GSN in 2011 and ‘SocialCash’ that was acquired by LifeStreet Media in 2009.

This power duo leads the Wagestream which has approximately 110 employees now. We will see if they will sign another exit like their previous startups. So far, it closed a Series A round of £40 million ($51 million) from Balderton Capital, Northzone Ventures, Shawbrook savings bank, QED, the Rowntree Foundation, the London Co-investment Fund and Village Global.

The Future

The benefits of Wagestream to its clients can be listed as such:

1. Higher retention rate of workers, thus spending less money on recruitment and training
2. Productivity gain as workers tend to take more shifts knowing they will be paid immediately
3. More desire from employees to work in that company, therefore having a better brand image

These outcomes emerged as a result of the data. I believe the more the benefits will be understood by the companies and the more the data is collected, the client portfolio of the Wagestream will be larger. And when the company becomes mature, the founders will sit on the table for a successful exit.