South African fintech start-up Paymenow has developed a financial wellness and inclusion platform that gives responsible employees quick access to already earned wages through a mobile app, and uses gamification to promote responsible financial behavior and encourage savings.
Based in Stellenbosch Pay now was formed in 2019 and went live with its first client a week before the lockdown in March 2020. Its platform gives employees quick access to their salary, but uses gamification to take them on a journey to financial well-being. As they pass the stages, their status improves and they get rewards in the form of lower service fees.
Founded by Deon Nobrega alongside head of business development Bryan Habana (Rugby World Cup winner), technical director Willem van Zyl, head of software development Gerry Potgieter and founding investor Garth Mackintosh, Paymenow aims to Ease the burden on payday lenders and micro-lenders through affordable, real-time access to liquidity.
While the startup hires employees directly, its client is the employer, who enables and manages payroll disbursement to employees, and deducts fees.
“Paymenow benefits both employers and employees by giving them access to funds employees desperately need, without them having to resort to exorbitant payday loans,” Nobrega told Disrupt Africa.
“Paymenow aims to dominate the nano-transaction space, offering quick access to hundreds of salary rands – where payday loans play – and helping employees move from loans to savings and investments, a small amount at a time.”
This is a new concept in South Africa, but has been tried, tested and proven successful in the United States (US) and United Kingdom (UK) over the past few years. Nobrega and Habana went to meet the two market leaders in London in September 2019, where they had an overview of the business models, but realized that there was a lack of financial well-being and responsibility in the solutions, in especially for these people, in emerging markets. , hard hit by payday loans and microloans.
“Instead of partnering with developed market peers, Paymenow has developed its own solution, in a way that focuses on ‘business for good’ with its end goal of turning a vicious debt cycle into a savings mindset,” Nobrega said.
The unique approach has paid off, with Paymenow having so far recruited 38 employers with a total of 50,000 employees able to access the platform. On average, 50% of employees sign up for the service within the first 60 days, and just over half transact twice a month. The average cash transaction is 350 ZAR (24 USD).
The startup is ready to grow further. Last June, he raised a seed funding round of ZAR 4 million (USD 230,000) to help him grow both locally and internationally, while he was also selected to receive capital and venture capital support from the Catalyst Fund, the global inclusive fintech accelerator. Nobrega explained the expansion plans.
“Paymenow operates in South Africa with the aim of making its services available in other SADC countries with a similar market need. We are currently collaborating with a few multinational organizations to deploy to Namibia, eSwatini and Lesotho. In the medium term, Paymenow should target other emerging markets in Latam and MEA,” Habana said.
Paymenow charges a flat transaction fee for each transaction made on its platform, with users charging lower fees as they progress through the financial education built into the platform. In the meantime, it is free for employers.
“It alleviates exorbitant debt and payday loans, as we are five to 10 times cheaper than the market average for payday loans. This boosts employee engagement and absenteeism while reducing turnover staff,” Nobrega said.
Launching a week before the country entered a strict lockdown posed challenges the team hadn’t anticipated, but Nobrega said the fact that it managed to get its first customer up and running and ensuring 45% adoption of the offer in the first month was “incredible”.
“The early access to wages model itself, while showing signs of success globally in developed markets, was new here and there was certainly a lot of market education to be done in South Africa. due to skepticism and negativity around unsecured lending,” he said.
“Also, with COVID-19 at its peak and employers stretched to the limit and wanting to protect their staff as much as possible, this market education has made things much more difficult.”
So far, so good for the fintech startup, which now – funding in hand – is preparing for even faster growth.