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Business News/ Companies / News/  India Inc sees employees log in for early salary options


India Inc. is increasingly tying up with fintech platforms to help employees tide over the month-end cash crunch. The partnerships allow blue-collared and contract employees to get emergency cash without joining a rival, or do multiple shifts that brings down productivity, or abscond after accepting cash-on-delivery from customers.

“Clients have told us that churn has dropped by as much as 50% because of access to early credit," said Rohit Rathi, co-founder and chief executive officer, KarmaLife. The fintech firm said most borrowings happen during the 20th to 25th of the month, and on Mondays and Tuesdays.

The average credit accessed by the 200,000-plus users of KarmaLife is 8,000-10,000. Without access to such credit, its 40-plus clients, including Zomato, Uber, Flipkart, Loadshare and Elasticrun, had noted that the workers were picking up multiple jobs to tide over financial stress. Their login hours had reduced and, in some cases, they absconded with payment given by customers for cash-on-delivery purchases.

The tie-ups between companies and fintech firms come on the back of rising demand for contract staffing. According to a report by recruitment firm TeamLease Services on Monday, contractual staff headcount has grown 21% to 180,000 in the past 12 months. The festival season starting from August to January will see manufacturing, retail, logistics and delivery chains scout for contract workforce to increase sales.

However, fintech analysts said the segment is small and has the potential to grow, but after two years of the pandemic, its main hurdles include rising defaulters and funding. “These companies have a market potential to grow, but they have seen delinquencies during covid, and now are tightening their filters on who to give credit to. The size of digital unsecured loan market is less than 50,000 crore in India, which is still small," said Prakash Agarwal, head, financial institutions, India Ratings. “Funding is a challenge for these firms and the deep-pocketed ones have a larger chance to survive."

KarmaLife has raised $3.5 million so far, of which $2.2 million was raised in February from Artha Ventures, Netgraph Investment, LV Angel Fund, Singularity Ventures and a clutch of Angel Investors. Rival Refyne is backed by global investors like Tiger Global, QED Investors, ICICI Bank, Jigsaw VC, DST Global, RTP Global, and XYZ Capital.

Refyne claimed to have over 200 clients, including Rebel Foods, Acko, Practo, Car Dekho and Cloudnine hospitals. “There was a huge demand for liquidity and there has been a 6x hike in transactions when compared on a month-on-month basis," said Pushkina Nautiyal, chief marketing officer at Refyne.

Nautiyal said its clients see 65% of their employees sign up and almost 35% employees transact on the platform in the first 3-4 months of rolling out services in a client firm. The transaction amount is 1,800-2,000 and often accessed by migrant workers who are shifting to larger cities and need to send money back to their homes.

Typically, the fintech firms tie up with non-banking financial companies and then alliances are struck with corporates requiring a large number of gig or contract workers. There are different forms of repayment. In most cases, the employee pays a convenience fee per transaction. The credit amount is settled against the salary payout at the end of the month.

According to a report by Refyne and consulting firm EY in 2021, up to 20% of employee turnover can be attributed to financial stress. “When this stress is carried into the work environment, it manifests as distraction, absenteeism, reduced performance and ultimately employee turnover," the report added. The report, Earned Wage Access in India, said about 42% of employees expect employers to assist them in securing financial well-being.

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Devina Sengupta
Devina Sengupta reports on the shifts in India Inc’s workplaces, HR policies and writes about the developments at India’s biggest conglomerates. Her stories over the last decade have been picked up and followed by Indian and international news outlets. She joined Mint in 2022 and previously worked with The Economic Times and DNA-Money.
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Updated: 04 Aug 2022, 06:06 AM IST
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