One of the industries we follow closely in Southeast Asia is the loan industry, particularly predatory loan services that can be a big issue for developing nations. With tens of millions of low-income workers at risk, we take a special interest in this to better understand how it can help.
That is why we wanted to speak to Salary Hero in Thailand. Fresh off a round of funding, the company is offering a better solution for salary-based loans working directly with employers rather than external funding agencies. This reduces the risk for employees and employers alike.
To better understand how this works, we spoke to Salary Hero co-founder, Jonathan Nohr about this solution and how it impacts the loan industry in Thailand. By working with employers and not charging interest, it does solve a lot of the issues and risks of predatory loans, but is it an actual viable business model.
We want to delve into a lot of this and also better understand what they actually do and how the funding will help them scale.
How large is this industry in Thailand as payday loans are often seen as predatory in markets like the US or Indonesia?
Thailand, like many other countries in SEA, have a large informal lending industry. A recent study by one of the big banks (SCB), found that ~80% of Thai workers making less than 30,000 THB/month (approximately USD 860), have used or are using loan sharks. Lower-income workers often do not have access to traditional lines of credit, and therefore tend to use informal lenders, charging anywhere form 10-30% interest per month, to cover unforeseen expenses.
How does Salary Hero defer from more traditional loan services?
Salary Hero is a viable alternative loan services for workers, helping them to bridge between paychecks and cover unforeseen expenses during the paycycle. Salary Hero’s Earned Wage Access (EWA) service is not a loan; it is an advance on salary already owed to you. EWA is a powerful tool to provide workers with a financial safety net in months when they have outliers in their cash flows. Likewise, unlike a loan, there are no interest rates or running charges, only a small flat fee at issuance. We work with employers to provide this service, alongside financial literacy education, to drive employee happiness and loyalty, resulting in better retention and productivity of your workforce. The service does not carry a charge for employers.
How will you use the funding?
The recent funding round of approximately 100M THB (US$2.8M), will be used to expand our employer partnerships across Thailand. Salary Hero provides employers with a unique opportunity to differentiate themselves in a market, where the competition for labour is heating up. The equity financing will support the improvement of our current product range (earned wage access and financial education) and the development of future financial products aimed at helping workers across Thailand (incl. at source savings, improved insurance and remittances, and debt advice).
In addition, our funding will be used to continue building our fantastic customer success team. Working with HR individuals across Thailand, we have learnt the importance of 24/7 customer support and guidance, and that is something we are determined to continue providing as we grow.
Who are some of your major clients in Thailand?
We are currently working with a broad group of clients across a range of industries in Thailand. In particular, manufacturing, retail, logistics, warehousing, consumer products and hospitality, have been some of the most active industries in our portfolio. Below is a quote we have sent through to other news outlets for context.
“At Hertz, our priority is our people. Salary Hero allows us to support our employees by offering early access to earned wages without impacting our business practices.” said Ratavud Panichewa, CEO of Hertz Thailand (Paragon Car Rental Co., Ltd). He continued, “Salary Hero allows us to help our team achieve financial stability and avoid predatory loans and debt traps. Salary Hero is well aligned with our values and ESG strategy with talent retention as a key focus.”
What’s next for Salary Hero?
At Salary Hero we are constantly looking for new ways to add value to the employers we are working with. We do this through two key avenues; improving employee financial wellness and improving employer tools and processes.
Through our mission of improving access to fairly priced financial products to workers across Thailand, we will continue to strengthen the differentiation that employers achieve through working with Salary Hero. This will happen in the shape of new product roll-outs in 2022 & 2023, including at-source savings, better remittances and insurance access, and debt advice.
In addition, providing our partner employers with world-class analytics and workforce management tools is a key value-driver for Salary Hero. Currently, employers receive dashboard access to better understanding the financial health of their workforce. We want to expand the capabilities of this product, providing deeper insights on things like worker happiness, retention and productivity measures. In addition, we want to build capabilities that empower employers to better engage and interact with their workers, and as we continue identifying key pain points that HR and leadership staff face, these tools will be built to help support them.