Inflation and bad credit choices drive demand for payday advance fintechs

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KARACHI: Ease of access to earned wages (EWA) is looking increasingly attractive to some employees in Pakistan as the high cost of living amid soaring energy and food prices bites. Payday advance schemes are capable of solving some of the main problems and difficulties that the majority of people who borrow money through legal and informal channels face, says Ali Ladhubhai, Chief Operating Officer of Abhi, a fintech company that financially empowers businesses and employees. , in an interview with The News.

Q. What is the idea behind launching your fintech startup in Pakistan?

A. Today, inflation is constantly increasing. It is estimated that around 80% of Pakistanis live paycheck to paycheck. It is difficult to manage unexpected expenses (bills or emergencies) and sad to miss good opportunities (discounts or investments). These things require immediate action and people usually have a few options, either they borrow from friends or family, they get a payday advance from the employer (not a process people like), or in the worst case, they go to a loan shark.

Not all of these options are ideal and lead to clumsiness, employer limits, or unwanted interest payments. This leads to stress and unproductivity in an employee’s daily life, which results in a higher turnover rate.

This is where Abhi comes in, started in April 2021, bringing financial freedom to employees, a Shariah-compliant solution that allows them to access their own earned salary, anytime, anywhere. We tackle the problem that matters most and empower people to live stress-free lives by giving them access to their rightfully earned wages. This service is free for the employer and there is no operational hassle for HR. We provide access to earned wages to employees without affecting company payroll and empower them financially so they can make smarter financial decisions. We are changing the payroll landscape and how an average employee spends/receives their salary. In July 2021, the company started its operations in Karachi with a team of almost 10 people. Since then, it has expanded to around 80 employees and two cities, Karachi and Lahore. The concept of EWA is quite common overseas, some startups like Wagestream, Payactiv and Refyne are already doing it. However, Abhi is the first player in Pakistan

Q. How impressive is your company for raising funds from venture capitalists (VCs)?

A. In just one year, we were able to grow from 0 to over 200 companies in Pakistan, which helped us raise the Series A funding round from $17m to a valuation of $90m with the Global VCs on board. This round was led by SeedInvest, one of the leading venture capital firms investing in fintechs, with its first investment in Pakistan.

Q. Do you think your fintech services compete with banks to some degree?

A. Pakistan has a lot more to improve when it comes to financial infrastructure. The market is so big that there is a big space for everyone to come and improve. Everyone plays a role in closing the gaps and stimulating the economy. This is where you will see fintechs and banks teaming up to support each other. Likewise, Abhi has signed MoU with UBL and Bank Alfalah to provide EWA facilities to their bank account holding employees which is the first time in Pakistan and will be operational soon. We are a Licensed Non-Banking Financial Company (NBFC). NBFCs are regulated by the Securities and Exchange Commission of Pakistan. This license is not for players like a bank. EWA is not treated as a loan as the repayment terms require payment within one month and there is no interest payment requirement. Abhi lets you access the salary you have earned so far and once the repayment is done, Abhi collects his fee.

Q. What products and services does your fintech company offer?

A. We are currently a B2B company and offer four main products.

1) EWA allows employees to access their earnings 24/7 through Abhi’s mobile app or SMS. The balance is displayed on Abhi’s mobile app, which increases every day, with the maximum amount being reached on the last day of the month. Users pay a fixed fee on each transaction and the transaction amount is deducted automatically and the remaining salary is credited to the user’s account on payday. EWA is only for employees whose company is registered with Abhi.

2) Invoice factoring is a financial wellness service, through which companies can borrow against their future cash flows, allowing them to optimize their operations, reduce their overall cost and better control their flows cash. An invoice is uploaded to Abhi’s system and validated before a line of credit is provided to a customer. Customers also have access to the Abhi Supplier Portal which they can use to make direct payments to their suppliers using approved credit, this way all transactions are seamless.

3) As a platform for financial wellbeing, salary delays go against Abhi’s values. To solve this problem, payroll processing facility is available which is a business portal through which employers can run their payroll on demand to any bank account or wallet in the country and have access to a dedicated platform to manage the salaries of their employees without any hassle. .

4) For companies facing cash constraints, our company offers the Payroll Financing Facility to bridge the gap between inflows and outflows, enabling them to pay their employees’ salaries on time and have better control over their finances.

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