This morning, we announced our investment in Wagestream, co-led with Balderton. We first met founders Peter and Portman and the Wagestream team 6 months after they started the company. We were immediately struck by the power of their vision around financial wellness, and their incredible execution power and speed – a rare combo which has a strong correlation with success.
Consumer finance is not working as a positive force for most of its customers
Over half of UK households have less than GBP 250 in liquid savings. With monthly pay cycles being the norm, many, when faced with unexpected expenses, are forced to turn to payday loans, credit cards and expensive overdrafts. These products typically worsen debt; in just the UK over GBP 2.5 billion is spent by consumers on repaying the interest and fees every year. This is another core reason why the financial services sector continues to be on the receiving end of consumer ire with terrible NPS scores, and accusations that they are not looking out for their customers’ interest.
Fintech delivering on fairness
At Northzone, we believe that technology can be a huge catalyst in turning financial services around to becoming a force for good. The heart of our thesis is that the biggest fintech opportunities come from investing in the companies that consumers love.
We have long backed companies in this mould. Companies like Trustpilot, who build trust and transparency online, Anyfin, who refinance consumer loans at a fair rate, Nested, who free house-sellers from property chains, Zopa who give consumer access to loans at much better rates than legacy providers, and MarketInvoice, who enable SMEs to access working capital.
Wagestream fits perfectly with our belief that financial wellness is a huge market opportunity. Our thesis, and the data shows it, is that Wagestream is not just a product to bridge a payday gap, but a platform to encourage broader financial wellness. It starts with giving employees access to earned salary when they need it, not having to wait until the end of the month. But it goes way beyond that. By connecting directly to the current account, expense patterns and affordability is automatically recorded over time and thus able to provide the individual valuable input to how best handle their finances, from spending to saving and investing.
The win-win: Employer value-add
By distributing through employers, Wagestream is also generating benefits to employers. Thanks to Wagstream, employees are freed from the monthly pay cycle and their data already shows that this significantly reduces usage of expensive credit. At the same time, the instant gratification of seeing your bank account increase as soon as you have finished a shift or day’s work, has also shown a real increase in shifts taken on and hence increased productivity for the employer. Early data is suggesting less churn as employees care so much about early access to pay that they don’t want to leave it behind! Certainly, we have been wowed by the engagement data which is off the scale with activation rates at more than 50%, followed by incredible ongoing engagement which shows that Wagestream holds great promise of becoming a ubiquitous financial services player and a true customer champion.
We are thrilled to partner with Wagestream, and get behind them wholeheartedly on this mission.