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We been following the progress of Capita’s scale-up development unit Capita Scaling Partner (CSP) for the last couple of years (see here and work back) - Indeed, Capita and current scaling partner Dragonfly AI were brought together via our TechMarketView Innovation Partner Programme. With that in mind I caught up recently to discuss CSP's latest venture with team members Matt Bunn and Jess Bonner, as well as Stephen Holliday the CEO and founder of new CSP partner - Level.
One of the most consistent themes of Capita CEO Jon Lewis’s tenure, has been a greater focus on employee wellbeing, providing the firm with a renewed sense of purpose that it is there “to do good” as well as make money. At the most tangible level this has manifested itself in two employees being placed on the PLC Board as Employee Non-Executive Directors. The company also took the decision to pay all of its UK employees, at least the independently verified real living wage – something that saw over 6,000 staff receive an immediate pay rise.
As regular readers will know, Capita’s Scaling Partner programme is an approach to identifying and nurturing digital disrupter businesses to ensure that Capita works successfully with disrupters that can add value to its existing client base. CSP’s latest partner is a financial wellbeing Fintech called Level. Established in 2018, Level is a B2B service that is designed to help organisations support their employees move from a debt to a savings culture.
Level has an interesting proposition serving a noble cause and I wanted to understand more about the service and how CSP would help the Fintech scale.
Financial wellbeing has become a serious issue in the UK with (according to the Money & Pensions Service) some 20 million of us struggling to manage our money properly on a day to day basis and with 11.5 million people possessing less than £100 in savings. Indeed, there are 9 million people in the UK who have had to borrow to buy food or pay their bills and with some 5.3m having needed debt advice. These are truly shocking numbers and reveal how we have become a society addicted to debt to fund everything from the basics to the latest consumer “must haves”. With so many with so little savings, it’s not hard to see how life’s financial emergencies – be it a broken boiler or unplanned car repairs, can cause many to resort to payday loans or similar high interest borrowing. Once in debt it can be very hard to escape.
This is of course all something that COVID has made only worse, especially for those right across the country on furlough those being made redundant and the many more at risk or working reduced hours. It’s no wonder that mental health issues have escalated this year.
Financial wellbeing is without doubt inextricably linked to wider mental health issues – if you are worrying about money and debt you are much more likely to suffer deteriorating mental health and anxiety – awful for the employee but also bad for their employer.
Level is applying advances in financial technology, mobile and recent changes to regulation, notably Open Banking, to create a proposition designed to improve the UK’s financial wellbeing. Specifically, there are three key actions that they are looking to help everyone achieve: fixing historic problems of debt, developing good financial habits today and building savings for tomorrow.
One of the key enablers for Level’s service offering is Open Banking – a major regulatory change that finally puts the user in charge of their own financial data. For the uninitiated, Open Banking now means that all UK banks have to have an open application programming interface or API through which the user can permit a regulated third-party to access their data on their behalf. The API acts as a plug which, once connected, allows Level to then view a user’s financial data and reorganise it in a simple and more useful way.
In practice this allows Level to aggregate multiple bank accounts into a single view, giving the user a clear picture of what money is coming in and what is going out. Level can then categorise user’s expenditure - via a ‘left to spend’ algorithm that provides a real time view of an individual’s available funds after all the essential bills have been deducted. This is aimed at removing the reliance on inaccurate ‘mental accounting’ of what people perceive to be available for them to spend. Users can also see in one place how many direct debits they have and how much their bills are in total, every month.
Level then uses data-driven “nudges” and various alerts designed to help influence and inform “good” behaviour choices. For example, this might include an alert when a subscription has gone up in price or where they are likely overpaying for bills offering up an opportunity to switch supplier.
What is also different about Level’s service is that although it is designed for the end user and the employee, it is something that is supplied in partnership with an employer. This not only brings Fintech into the workplace but crucially enables employees to benefit from access to ‘salary-linked’ financial products, which are only available to them as a result of being in employment. Level is working to create a solution for employees that has a better price and user experience to anything that they could get on the open market, all done with aim of making employees better custodians of their own financial future and making their wages go further.
It’s also where Capita has been already able to add specific value with the service currently available to Capita’s 40,000+ UK staff. Indeed, Level has already adapted its tool based on Capita staff feedback and usage. Co-creating the tool with Capita has been one of the ways in which CSP will add value to the partnership.
The value of the salary link is that it enables employers (via Level) to offer employees products that are structurally better, in terms of price or user experience, than anything on the open market. This is because the salary link allows Level to offer services like early wage access which effectively swap an employee's credit risk for their employer, making the service many times cheaper. Payroll linked savings hugely reduce compliance, money flow and onboarding costs and make it much easier for Level to design a quick and user-friendly sign-up process for the user.
Poor employee financial wellbeing impacts productivity at work, but the employer has this powerful salary link which puts them in a unique position to address these issues for the benefit of both employer and employee.
Advances in modern financial technology offer a great opportunity to take the best tech, combine it with a salary link to create attractive products that employers can deliver to their staff to help them with their financial well-being. Open Banking will help accelerate the unbundling of banking services so that financial service providers or technology providers can take the best of these services (e.g. deposits, transactions, payments, regulation, fraud detection or foreign exchange) and adapt them into value added services by using the salary link to aid financial well-being.
Level is starting to do this initially with two principle products – ‘Early Wage Access’ and ‘Payroll Linked Savings’.
Level’s ‘Early Wage Access’ enables employees to advance a percentage of their earned but as yet unpaid salary. This is transaction is completely confidential from an employee line manager that is designed to reduce the volatility of the situation when someone gets hit with a one-off cost. So, if you have a broken boiler, instead of going into debt, you can access some of the money that you have already earned but have yet to be paid. It’s a quick transaction that costs a standard fee of £2, and with no credit checks and 100% acceptance rate, it is not a loan. The advance is then automatically reconciled by Level and the employer on payday.
To prevent overuse there are a number of safeguards built in that can be configured by the employer. Level itself recommends that no more than three advances or 30% of earned wages up to a max of £500 per month are allowed, with an automatic service to catch persistent use.
Level was developed with the goal of helping foster a savings culture – this is the ultimate aim of the business, to help employees develop a savings buffer and establish payroll linked savings as a social norm in the workplace. Here Level uses behavioural insight and nudges to encourage employees to save more with specific access to savings accounts that offer the high savings rates from FSCS (government deposit guarantee) banks. It’s also about offering would-be savers a seamless user experience so that it’s very low effort for the employee to sign up, open a new savings account and link it to payroll.
One of the most positive outcomes that we have seen from Covid-19 is a renewed and reinvigorated approach to social responsibility within the wider tech sector. This has manifested itself in so many different ways, ranging from employee health and wellbeing to altruistic behaviour in the marketplace. Indeed, health and wellbeing has never been taken so seriously within UK PLCs.
Finances play such a key role and with things like long term student debt, extortionate housing costs, easily available credit, as well as a lack of financial education and planning, it’s not surprising so many people find themselves in financial trouble. COVID has of course only made this worse for many.
Level’s proposition for employers is that not only is it in their interest to support their staff but that they are uniquely well placed to do so. Working with Capita is allowing Level to fine tune it’s proposition ahead of a wider roll out, potentially of course with some of Capita’s enormous client list, which includes many of the largest employers in the UK.
What I particularly like about Level’s proposition is that whilst it has a big objective to shift people from a debt to savings mindset, it’s trying to achieve this through helping people make small and manageable changes that should ultimately add up to making a significant difference.
For Capita it’s another tool in its armoury of HR and employee services, both for their own staff and that of their clients. But more than that, it’s another statement that employee wellbeing is something that the firm takes very seriously and is acting upon.
Crucial to making this proposition a success will be getting staff to engage regularly and conveniently with the tool to drive behaviour change. Offering availability over a range of devices is helpful but probably most important is integrating Level into people’s lives beyond the working environment, where it’s viewed as the most trusted source of financial advice and budgetary tools. Helping people better understand and take more control of their finances is without doubt a noble cause and something that may well help deliver better (financial) outcomes for both employees and their employers.
Posted by Marc Hardwick at '13:21' - Tagged: Capita scaleup wellbeing hrtech
