Advanto founder and CEO Martin Fortelný has become a regular contributor to the Fintree.cz website. As a pioneer in HR fintech, he will be covering news and views from this new industry there. In his first article, he wrote at length about why pay that arrives more often than just once a month is set to become the standard.
Send money instantly across the globe? No problem. Invest in securities or real estate? Done in a few clicks. Exchange currency? A piece of cake. Get access to wages you've already earned? Wait until the “fifteenth”.
In many ways, fintech has grown into our lives so thoroughly that we now take it as the norm. Thanks to technology, plenty of operations that we used to have to wait for, or arrange in complicated ways, now happen instantly. Users, companies, and the economy all benefit. Advanto applies the same standard: in this day and age, it should be normal to get access to earned wages whenever I need them.
It's honestly hard to believe that, when it comes to wages, employees are still, to a large extent, locked into a monthly cycle of income and expenses. Yet it really doesn't have to be that way. It arguably shouldn't be that way at all. Thanks to fintech, “Pay Anytime” is perfectly achievable without placing demands on the employer, and it brings a whole range of benefits to everyone involved. And this isn't anything new—pay arriving more often than once a month is a trend in a number of Western economies. It isn't a complete novelty here either—on the contrary, we can think of it as a return to the successful era of the First Republic, when pay several times a month was the norm, for example, at Baťa's shoe factories.
He, too, likely knew that paying out earned wages more often eliminates the so-called “payday millionaire” phenomenon—the habit of splashing out more freely once a fresh paycheck lands. Today we know that most people who get paid once a month have around 80-90% of their pay gone within roughly a week. About two weeks before payday, people reach a critical point where any unexpected expense bigger than around CZK 10,000 can push them into a spiral of loans and a debt trap. And this isn't limited to low-income groups, either—the payday millionaire phenomenon has also been documented among people with above-average incomes. In such a situation, drawing pay gradually and spreading income more evenly starts to look like an alternative that could help prevent situations like these.
It's clear that, ideally, everyone would responsibly educate themselves about finances and act accordingly. On the other hand, we know from every survey and from practical experience that theoretical education just doesn't work all that well. Advanto's approach is that financial products themselves must be safe by design, and their design should nudge people toward financially sound behaviour. And it's working. People who use Advanto withdraw part of their pay very thoughtfully and responsibly.
Advanto's ambitions go beyond simply making “Pay Anytime” the norm. When it comes to helping and protecting employees from financial instability, we want to go further, and among our nearest-term plans is adding automated savings to help people build a financial cushion for unexpected situations.
And what's in it for employers? Not only is it a handy benefit for their people that spares them stress, but Advanto also gives employers insight into how their employees are managing financially. That kind of information can be a huge help in preventing people—of whom there is a painful shortage today—from leaving for better offers.
The article was published on: Fintree.cz
