When a large portion of the world’s population shifted to white-collar and corporate jobs in the 1950s, getting paid salaries on a monthly basis became the standard for many professionals, and this model has remained a fixture of the corporate world to this day.
It’s easy to see why. A fixed monthly interval at which you have to pay staff their income makes the payroll team’s life easier and reduces costs for the company, while making cash flow easier to predict and manage. Still, all these factors favour the employer, rather than the more vulnerable employee, which often has to contend with unexpected payments like medical emergencies.
FlexxPay, a UAE-based alternative financing startup, has introduced a solution to the MENA region.
The company offers a cloud-based solution that seamlessly interfaces with an employer’s payroll system and allows employees to withdraw a portion of their salary before the month’s end, equivalent to what they’ve earned so far. For example, by the third week of the month, an employee would have essentially earned half of their salary, and can therefore request 50% of that final sum to be paid out by their employer, for a small fixed transaction fee that goes to FlexxPay.
This model falls under the Earned Wage Access (EWA) financial service classification, which is seeing increased popularity around the world as more startups offer employees ways to access their hard-earned funds before the next payroll cycle. There are benefits for the employer too, of course, as companies that allow EWA have more motivated employees, report less absenteeism, and are more attractive to potential hires. Finally, early access to salaries even benefits the economy.
The Abu Dhabi SME Hub spoke with FlexxPay Co-Founder and CEO Michael Trüschler to learn more about his company’s innovative solution, and his entrepreneurial journey so far.
Michael Trüschler, Co-Founder and CEO of FlexxPay
How did the idea behind FlexxPay come about? Did it stem from a personal experience?
FlexxPay is a solution to a real-world problem we identified, namely: More than 50% of the workforce live from payday to payday, unable to cover unexpected expenses that come up during a month. For many, that means skipping meals, selling possessions, taking on any extra work or going through extreme measures.
This problem deserves a solution. It’s the reason we do what we do. We fix the pay frequency problem at its root by providing businesses and their employees with an instant pay platform. We empower those who need it the most to access a portion of their already-earned income whenever they need it.
For employers, having employees struggling and suffering under this level of financial stress cannot be good for productivity and staff motivation. This means that firms are also motivated to offer FlexxPay’s solution to their employees simply to improve productivity and staff well-being.
During the early days of FlexxPay, what was the focus of the founding team, and what challenges did you first face?
Our initial focus was on building the product and B2B sales. The main challenge is and was the sales cycle, i.e. the time it takes to win a new business. A lot of follow-up work was required. As a first mover in this market, we had to educate the decision-makers on what it means to have financially stressed staff in the company (productivity loss, retention rates drop, motivation loss etc.). Any time a brand new concept enters the market, it takes a while for people to get used to the idea and to realise how much they can benefit from it.
We focused a lot on HR managers who could genuinely see the value of our product – both in terms of improving employee well-being, but also as a way of reducing their own workload.
On the financial side of things, how does the early withdrawal of salary funds work exactly, and how does FlexxPay earn revenue?
The staff of enrolled companies use the FlexxPay app to request salary access. The app shows the amount of available funds. With a few clicks, the employee completes the transaction on the app. Funds are directly sent to the employee’s bank account, in a WPS-compliant manner. The offering is also Sharia-compliant. FlexxPay takes a fixed fee per transaction, regardless of the amount requested. No interest is charged.
By creating FlexxPay, you've addressed a problem that has existed for decades within the professional world, where most employees can only access the money they've been progressively earning at the end of the month. Do you believe there is an alternative to the way things are being done today?
Yes, technology allows this change. With FlexxPay, staff can see what they have already earned and access this on the spot, instantly.
Beyond easing financial pressures on employees and improving productivity within companies, you've previously discussed the positive economic impact that the early distribution of salaries could have, via the money multiplier effect. Can you share with us some more insights about this, especially given that FlexxPay has been active for nearly 4 years at this stage?
Our vision is that every company in the country could offer a benefit like FlexxPay to their staff. This means that staff would access their salaries early, spend it and/or bring it to banks that can then lend this money out to others. Since banks only have to keep a certain percentage of the funds deposited, they can lend out a multiple of their deposits. Money goes into the economy earlier than without a benefit such as FlexxPay.
Since the company's launch in 2018, how have your services grown?
Like most startups, we have pivoted along the way. Today we focus on offering a variety of digital products to financial institutions and companies. This includes a white-label payroll solution, micro-credit solution and micro-insurances, besides early wage access.
There is a lot of demand among financial institutions to offer digital products to their clients and FlexxPay is able to provide these products. Companies that are interested in digital transformation, particularly in the HR sector, turn to us as well.
You expanded operations to Egypt earlier this year. How are the needs of that market different from those of the UAE and Saudi Arabia, and how will these findings inform your decisions for the future of the FlexxPay platform?
Our operations in Egypt are at a very early stage. At present, the main focus for FlexxPay is on KSA and UAE.
After 4 years in the market, how would you describe the alternative financing sector today in the MENA region?
A large part of the MENA population still has no access to proper financing facilities. We are still dealing with a huge population of unbanked people. This is where the opportunity lies for startups such as FlexxPay – to provide services and technology in cooperation with existing financial institutions.
We believe that the combination of both startups and financial institutions is the magic formula. Startups can develop quickly with a great UX and UI that banks could not do. Banks, on the other hand, have the capital, license and distribution power to scale the startups’ offering.
What's next for FlexxPay?
We are focusing on building and deepening relationships with financial institutions in the region while growing our corporate client base in UAE and KSA. Watch this space for our next new product launch!