BNZ bankrolls scheme to give workers an alternative to payday lenders

Monday, 22 March 2021

BNZ chief executive Angela Mentis says the PayNow scheme could prevent some vulnerable workers falling into the clutches of payday lenders.

BNZ is providing interest and fee-free funding for a payroll scheme cash-strapped workers can use to get paid early.

The bank’s chief executive Angela Mentis hoped it would provide an alternative to loan sharks for financially vulnerable workers.

The PayNow scheme has been developed by NZX sharemarket-listed fintech Paysauce, and will be available to around 20,000 employees whose payrolls are managed by Paysauce.

But Paysauce co-founder Asantha Wijeyeratne said the number of employees covered would rise as Paysauce expanded, and the company was willing to let rival payroll companies use PayNow to spread the social benefits.

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Asantha Wijeyeratne, co-founder of Paysauce, says the growth of short-term lenders is nothing for the country to be proud of.

The PayNow system allowed employees to be paid before payday for work they had already done, Wijeyeratne said.

That would mean people who needed to pay a bill before payday could avoid having to borrow from a high-interest lender, he said.

“For many people, PayNow will mean the difference between paying for staples such as food, clothes and education with their own money, over high interest loans between pay cheques,” Mentis said.

The PayNow service had existed for some time, but relied on individual businesses agreeing to make payments to workers before payday, and not every company had the cashflow to do it, or was willing, to do that, said Wijeyeratne.

The funding from BNZ allowed PayNow to be extended to the employees of all Paysauce’s 3300 client companies, he said.

There was a long tradition of companies paying desperate workers early, if they were in financial difficulties, but it was an ad hoc system, said Wijeyeratne.

“It’s a bloody hard conversation for someone to say, ‘Excuse me, my car has broken down, and I need it to get to work. Could you lend me $250?’,” said Wijeyeratne.

The idea of allowing workers to get paid early for work they had already done challenged traditional notions of the pay cycle, Wijeyeratne said.

“We’re all so accustomed to convenience and freedom as consumers, but payroll is still operating on an outdated model,” he said.

“It seems obvious that it should be possible for employees to access their own money when they need it, without resorting to exploitative high-interest lenders.”

BNZ has a growing history of providing not-for-profit funding on social good financial projects, including funding Good Loans, Habitat for Humanity and The Good Shop.