It’s common for corporations to dole out part of an worker’s salary as an advance for something from medical emergencies to a marriage. Fintech startups which have carved out a enterprise mannequin from this company ritual are anticipating elevated demand for salary advances, significantly from gig staff, as India’s monthslong competition season approaches.
(India’s competition season begins subsequent week with Krishna Janmashtami and goes on till New Year.)
Among these startups is Refyne, which rolled out its flagship product, referred to as ‘Salary on-Demand’, in 2021. The Bengaluru-based firm is backed by marquee buyers together with Tiger Global, QED Investors, and DST Global, and counts amongst shoppers not solely Swiggy and Flipkart which have massive supply fleets but in addition consultancy large EY.
“We ought to have 30 million clients by the top of 2025. We are at 10 million now and had been at 2 million final yr,” mentioned Chitresh Sharma, co-founder and chief government officer.
Refyne, which competes with KarmaLife and SalarySe, mentioned it disbursed ₹800 crore as salary advances, or loans in opposition to salaries, within the newest April-June quarter.
Such fintech startups usually associate with non-banking monetary corporations for capital to disburse as advance salaries. A majority of their shoppers are usually corporations with numerous contract staff or gig staff.
Repayments take numerous varieties. In most circumstances, an worker availing an advance salary pays a comfort price per transaction. The credited quantity is settled in installments, adjusted in opposition to their salary over a couple of weeks and even as much as a yr. The curiosity proportion on such loans vary from 18% to 24%.
Not simply existential borrowing
While gig staff account for a big chunk of these looking for advances in opposition to their wages, younger staff in white collar jobs too discover use for such loans, though their causes are likely to not be existential.
“Those within the 30-35 age bracket who earn a few lakhs a month are borrowing cash from our platform as most of their earnings are invested in shares, gold, SIPs, and so forth. Some of them take a fast mortgage to purchase a brand new telephone or pay for an costly evening out,” mentioned Sharma.
For such corporations, partnering with fintech startups corresponding to Refyne, KarmaLife and SalarySe to offer salary advances permits them to help their staff with out having to run an inside mortgage scheme.
“Given the low ranges of financial savings, a number of (younger) associates are prone to face monetary shortfall, which isn’t simply restricted to the month-end,” said Kartik Narayan, chief executive-staffing, at recruitment firm TeamLease Services Ltd. “They also expect help from employers, who are not keen to take the administrative hassle of running a ‘salary advance’ programme.”
TeamLease too has partnered with a fintech startup to supply an advance salary choice to its staff. Narayan didn’t disclose the agency’s title.
At a number of different corporations, although, a majority of such debtors are usually gig staff, significantly at supply corporations.
“Those who work in ‘fleet-on-the-street’ jobs go for extra journeys delivering merchandise as a result of they are going to earn incentives over the subsequent few months (in the course of the competition season). They must pay for their gas for journeys and subsequently entry our platform for early wages to go for these extra deliveries,” mentioned Rohit Rathi, co-founder and CEO of KarmaLife.
E-commerce corporations or on-line marketplaces incentivise their supply executives to run extra journeys throughout their peak competition sale season in addition to rent extra gig staff to deal with a considerably elevated quantity of deliveries.
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KarmaLife, which has greater than 60 shoppers within the e-commerce, logistics and meals supply sectors, counts Artha Venture Fund, Net Graph Investments, and Singularity Ventures amongst buyers.
“The order quantity (of salary advances) and the quantity accessed have elevated by 1.7-2x during the last one yr,” mentioned Rathi. KarmaLife rolled out an possibility for debtors to return cash at a shorter interval in February, which has seen an 8 time enhance in demand since its launch.
The captive gig employee
Sunil Chemankotil, nation supervisor for recruitment agency Adecco India, provided an perception into the raison d’être for such ‘salary advance’ fintech startups, particularly given the rising variety of gig staff in India.
The Economic Survey for 2023-24 launched in July projected the number of gig workers in India to develop to 23.5 million by 2029–30, accounting for 4.1% of the overall livelihood within the nation by then.
“Loans are not straightforward for contract staff, and banks ask for numerous paperwork. (But as) their employers have carried out the validation… getting cash from fintech platforms is swifter for them,” said Chemankotil. “For the fintech platforms, the gig workers are similar to a captive customer base to whom they can sell their other products.”
Gurgaon-based fintech startup SalarySe, which was based in 2023 and is backed by Peak XV’s seed fund Surge, provides ‘credit on UPI’, which doesn’t contain curiosity or some other value in taking an advance.
“Using credit score on UPI… somebody who’s incomes ₹30,000-50,000 a month will get entry to a product which is possible to them,” mentioned co-founder Piyush Bagaria, including that SalarySe is seeing sturdy curiosity from IT companies, healthcare, and schooling companies.
