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A simple concept, well executed. That is Active Hours, a Fintech solution that pays employees who live paycheck to paycheck as soon as they have earned their pay, rather than two weeks later.
The Active Hours story says a lot about how Fintech has started to impact basic financial needs of those with not much to spare.
I had the privilege to participate recently in an excellent conference co-sponsored by CFED and the San Francisco Federal Reserve Bank. CTED and the SF Fed have created a very helpful and insightful book called “What It’s Worth: Strengthening the Financial Future of Families, Communities and the Nation”. A series of insightful essays brings together many factors underlying poverty in the US. One theme running through them all is that of financial health. Sponsored by the Citi Foundation, this substantial book is free to order or download.
One of the panelists was Ram Palaniappan, CEO of Active Hours. His company grew out of a realization that employees of his previous company were paying overdraft charges or late fees on bills, because although they had earned some money, they had to wait two weeks to get paid.
Ram decided that the two week delay was because of outdated manual payroll procedures, and that there was no reason people shouldn’t be paid as soon as they had worked. He started to make advance payments to his own employees when they needed it. Then he was advancing against earned pay for others, including some he didn’t know. As this remarkable practice grew, he needed some automation.
The Active Hours site allows his customers to give him access to their timesheets (often through employer- or payroll-company APIs), and their bank accounts (ideally through APIs). Active Hours reads and values hours worked since the last pay period, and immediately transfers requested funds (up to the value of the timesheet) into their current account. Some customers will do this at the point of sale before paying for purchases – that’s how immediate it is.
Active Hours is reimbursed by direct debit from the customer’s account as soon as their “official” payroll hits.
Here’s the most amazing part. Active Hours charges no fees or commission. Instead, customers are invited to pay whatever they think the service is worth. And it works!
A few observations:
“What It’s Worth” is a book well worth reading, and reading with Fintech in mind. There are many ways in which Fintech can contribute to the vision, ideas and strategies contained within the book.
Most Fintech entrepreneurs would like their companies to have a positive social impact. With the kind of creativity seen in Active Hours, they surely can.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
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Nkahiseng Ralepeli VP of Product: Digital Assets at Absa Bank, CIB.
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