Millennials: The Forgotten Generation

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Millennials: The Forgotten Generation

It seems today’s younger generations have been struck a raw deal. They’ve been priced out of the housing market, the retirement age has risen, and they’re dogged with debt in a world that encourages them to keep spending. This is confirmed in a 2018 study from by Resolution Foundation which revealed that UK millennials are the second worst-hit financially in the developed world and it looks that they have a lack of financial education.

Another study from the National Endowment for Financial Education, indeed, demonstrates that while 69 percent rated their financial knowledge highly, only 24 percent of millennials demonstrate basic financial literacy. Could it be that through a lack of financial awareness, this generation is truly struggling to survive between Instagram posts of smashed avocado on toast? Or could it be that the demands of modern society are forcing them to over-stretch themselves and rely too heavily on parents, credit cards and overdrafts to fund their lifestyles without any real regard for future financial stability?

On the one hand, they have been lumbered with a higher cost of living as average price inflation for the UK recently reached its highest since April 2012. On the other hand, highly targeted online ads, social media influencers plugging products from high-paying brands and a growing influx of ‘must-have’ subscription services are just a few of the forces encouraging them to keep spending.

Financial education is needed

There are various factors contributing to the struggles of younger generations. Student debt, which has now reached a record high of £100bn, is forecast to reach £160bn by 2022. A debt-free future seems increasingly unlikely for younger generations considering university tuition fees are now at £9,000 per year.

According to the Institute for Fiscal Studies think-tank, an estimated 83 percent of graduates will not fully clear their debt within the three decades in which they are expected to complete repayment. Further research from First Direct reveals that 43 percent of millennials are planning on using money inherited from their parents to pay off their debts, which clearly means that financial literacy is heavily required.

The continuing housing crisis means one in four millennials are yet to fly the nest. While it’s easy to assume this generation has become comfortable living off their elders, a study from the Resolution Foundation found that despite having to spend three times more of their income on housing than their grandparents, they have to make do with a poorer standard of accommodation.

When it comes to employment opportunities, millennials are often accused of being job hoppers. Gallup’s 2016 study “Millennials: The Job-Hopping Generation,” does indeed reveal that millennials are the most likely generation today to switch jobs. Yet, the report suggests that many millennials would rather not have to continually switch jobs, they do so because employers don’t give them compelling reasons to stay

The report states that “while millennials can come across as wanting more and more, the reality is that they just want a job that feels worthwhile — and they will keep looking until they find it.” Hardly surprising considering less than half of UK graduates are in jobs that actually require a degree.

Striking a healthy balance

This generation are facing unique financial challenges that differ significantly from those that their parents encountered that’s why for them a huge financial education is even much more important.
Clearly, younger generations would benefit from educators who should review their approach based on the challenges that these generations are facing, and employers should do their part too.
Employers should also consider taking steps to increase financial wellbeing in the workforce because they have a responsibility to ensure their financially vulnerable workers are given a fair chance, just like the generations before them.
From providing free financial education and guidance to reviewing whether payment processes really fit in with modern financial demands, employers must shoulder some responsibility. In doing so, they could even benefit from gains in recruitment, retention and productivity through more financially healthy and confident employees.
It’s evident that the world has changed when it comes to managing personal finances. Today’s younger generations have been thrust into coping in adverse financial conditions and they’re displaying worrying signs of financial illiteracy. They are being forced to adapt to new financial struggles with no real guidance on how or where to start. Responsibility should not just fall on the individual, family unit or the government. Employers will need to shoulder some of this responsibility if millennials are not to be forgotten and given a fair deal.

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How To Reduce High Cost Credit

First seen in FT Advisor in June 2018

It’ll take more than the FCA’s new guidelines to reduce financial difficulty caused by high cost credit options. Education and fintech innovation must form a combined approach to bursting the personal debt bubble says our CEO, James.

The majority of those using high cost credit options must understand the financial ramifications, but they are increasingly finding it difficult to escape the vicious cycle of debt – which obviously increases the financial stress. While the FCA’s guidelines are intended to reduce the number of people relying on high interest credit options including home-collected loans, in-store credit cards and rent-to-own schemes, it’s easy to wonder whether enough is really being done.

Three million people in the UK currently rely on high cost credit schemes and 19 million regularly use overdrafts and are in financial trouble. Just last month, consumer group Which? revealed that unarranged overdraft fees can cost borrowers up to seven times more than a payday loan, although high street banks escape the criticism and reputation of the payday lenders.

While its plans to impose caps on charges are a welcome move, the FCA would do well to explore longer-term steps that could change the narrative for those living with debt from a tale of owing to owning. It’s not the FCA’s job to simply change the fortunes of those burdened by debt and help them live happily ever after, but while capping charges and issuing mobile alerts are a step in the right direction, they will fall short of the level of action that is required to make a meaningful change reducing the financial difficulty.

The jilted generation

The reality is that these guidelines will not be enough to prevent people experiencing severe financial stress by paying extortionate fees to borrow before payday. As wildly acknowledged, this problem won’t be solved overnight, a good start however would be having similar standards, limits and restrictions across the full range of finance options so people can more easily compare and make informed decisions. Fundamentally better education around personal finance, combined with digital tools that provide more transparency and control over their own finances, will be how people will turn their fortunes around. Shaping this two-pronged approach should be central to the FCA’s efforts in helping people avoid high cost credit and therefore financial troubles.

In late 2017 the FCA themselves uncovered an estimated 4.1 million people in the UK living in financial difficulty, owing to missed domestic or credit bills. It said that the consumers that had failed to pay bills in three or more of the six preceding months were most likely to be aged between 25 and 34. For younger generations, there are various financial challenges which make them worse off than the generations before them.

The ongoing housing crisis means one in four millennials are yet to fly the nest, let alone pay off student loans on time. An estimated 83 percent of graduates will be unable to fully clear their debt within the three decades in which they are expected to complete repayment. When it comes to building up a nest egg, things also look bleak with 43 percent of millennials intending to use money inherited from their parents to pay off their debts.

A 2018 report by Resolution Foundation suggests that UK millennials are the second worst-hit economically in the developed world, but things could be even more dire for future generations which could really experience financial difficulty. If they too are laden with lifelong financial burden and their own parents have not had the means to save an inheritance to pass down, how are they to cope?

A new balance

Educators and employers should be obligated to offer free financial guidance and the FCA should be making steps to support both parties in making this happen. The challenge is that even with free resources available, younger generations believe they have a strong handle on their finances, therefore they don’t pay attention at their possible financial difficulty. According to a study from the National Endowment for Financial Education, 69 percent rated their own financial knowledge highly, yet only 24 percent of millennials demonstrate basic financial literacy.  

There are plenty of recent studies supporting the fact that younger generations have and will continue to have the odds stacked against them.  In an age where technology dictates how we live our lives, steps should be taken to provide better education around personal finance with the aid of technology. Just as the likes of Uber, Deliveroo and Airbnb have disrupted out-dated conventions, Fintech is revolutionising the way we handle our money by putting more control in the hands of the consumer.

The FCA could begin to make a real impact by encouraging employers to explore Fintech products that can help workers build a better understanding of their finances and reduce their financial difficulties and therefore their financial stress. Considering financial troubles have a significant impact on mental health according to debt charity Step Change, which in turn impacts peoples’ productivity at work, it is in the interest of employers to consider their workers’ financial wellbeing too.  

With experts at Manpower Group predicting that by 2020 millennials (now aged 21-35) and Gen Z (aged 20 and younger) will make up more than half of the entire workforce, the financial wellbeing of employees has never been a more important factor.

Employers needn’t dig deep to provide such support, with solutions emerging that are helping workers quickly pay off overdraft charges, credit card bills and other unexpected expenditures, free to implement with zero impact on the business’ cashflow.  

There are now Fintech solutions that can grant access to income as it is earned which is of great use to those who need access to funds before the end of the month. Income smoothing is a far more powerful and fair solution, avoiding the negative cycle of inflated repayments and debt which, in the long term, increase the financial difficulty.

Fintech solutions that are breaking down the traditional conventions of monthly pay cycles, which don’t necessarily fit in with modern financial demands, are not only going to relieve the financial stress of workers but have the added benefit of encouraging them to stay in work and be more productive.  

Debt should not be a taboo issue; politicians, institutions, businesses and employers need to embrace initiatives that allow those who need financial support to access it without getting themselves into situations that can quickly spiral out of control. Educators and employers are ideally placed to support workers to become more financially savvy and less financially stretched using the latest fintech solutions that are disrupting pay forever helping, hopefully, people’s financial difficulty. 

FCA high interest consultation

The Financial Conduct Authority (FCA) yesterday delivered an outline of plans to reduce the number of people using high interest credit options such as home-collected loans, in-store credit cards and rent-to-own schemes. There are 3 million people in the UK currently using high cost credit schemes and 19 million people regularly have to use an overdraft. While the plans put forward do represent a step in the right direction, simply capping prices or issuing mobile alerts fall short of the level of action that is required to make real change.

These guidelines will not be enough to prevent people paying extortionate fees to borrow before payday and experiencing severe financial stress. Reducing the reliance on high-cost credit is only possible if the people who are using these services are fully informed about the dangers of these schemes and made aware of what alternatives are available to them. After all, the FCA themselves reported that in general, consumers had a poor understanding of their own loan repayments.

Debt should not be a taboo issue; we urge politicians, institutions, businesses and employers to embrace initiatives that allow those who need financial support to access it without getting themselves into situations that can quickly spiral out of control.

Fortunately, technology can be of great use to those who need access to funds before the end of the month. Granting access to income as it is earned is a far more powerful and fair solution, avoiding the negative cycle of inflated repayments and spiralling debt. Technology allows us to control every second of our lives, but staff are still having to wait until payday for the cash they’ve earned.

Hastee Pay changes that, offering a revolutionary new way for people to manage their finances. We allow employees to receive pay immediately it is earned, making waiting for payday a thing of the past.

Financial freedom improves wellbeing and productivity, benefiting both staff and their employers (with no cost to companies and zero impact on their cash flow).

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Is disruptive tech worth the investment?

First seen in Financial Director in May 2018

Businesses must embrace disruptive technologies, but first they must learn to recognise the traits of meaningful disruption says Peter Ingram, our very own CTO.

Disruption is more than just a buzzword, it’s happening all around us. PayPal revolutionised the way we pay for things online and transfer money with friends and family. Uber has changed the way we travel in cities. Challenger banks such as Monzo are shaking up the archaic banking system with a streamlined digital approach. Open banking is enabling data to be shared securely between multiple accounts belonging to any one person, bringing us greater visibility and control over our finances.

But it’s not just about technology for the consumer. Emerging technologies are set to reshape the way businesses operate. It makes complete sense when you think about it. Take payroll, for example. The traditional pay cycle simply doesn’t fit comfortably with the way we live in 2018. It’s an area that is ripe for disruption.

The wellbeing, attendance and retention of the worker is becoming increasingly important to businesses today. If businesses can take steps to alleviate pressures in their workers’ personal lives, they can leverage these workplace perks to reduce the spend on recruiting and staff turnover.

More than 50 percent of all organisations globally have difficulty retaining some of their most valued employee groups, according to a recent Willis Towers Watson study. Research by Kronos and Future Workplace finds that 87 percent of HR leaders consider improved retention a critical or high priority for the next five years.

These factors aren’t just important to businesses that employ permanent workers – with the emergence of the gig economy and industries that traditionally rely on casual, temporary and shift workers, being able to attract and retain a reliable, productive workforce has a significant impact on business agility.

Meaningful Disruption

So what should businesses look for in the disruptive technologies that are on offer? With so many innovative solutions emerging for businesses – and differing variations of each from different players contending for the same slice of market share – it’s difficult to know what’s worth investing in. Factors such as integration and scalability and compliance must be taken into consideration.

Open APIs & microservices are essential attributes in any disruptive technology. Acting as translation layers that enable your systems to communicate with the technology and vice versa, these are important in avoiding the complexities associated with outdated legacy systems. Avoiding monolithic blocks of code will reduce the time and cost spent getting the integration right, avoiding the technical debt traditionally accrued through work that must be redone repeatedly.

The ability to scale up easily is paramount, therefore a worthwhile technology must incorporate autoscaling – available through any technology built with microservices from AWS, Google or MS Azure. Autoscaling means additional servers are switched on automatically, only when necessary. When the service is hit with an influx of traffic, more server space is automatically assigned to the service.

Autoscaling should also bring the cost down for the business since the technology provider only pays for what they use meaning they’re not overpaying for servers that they are not yet using at full capacity.

Without autoscaling in place, the reliability of the technology can also be compromised through the provider placing strain on existing servers and waiting until they are at full capacity to manually scale up. As more users begin to adopt disruptive technologies, the quicker the need to scale up grows. Manually scaling up each time the servers reach capacity can only cause repeat reliability issues.

Compliance and data security are vital factors that must be seriously considered. While it has become a saturated talking point, GDPR is undoubtedly an important factor. Again, this is where a product supported by reputable microservices will provide the best possible value because they ensure the back-end activities happen in a safe and compliant manner.

When it comes to multi-region data residency, the technology must be flexible. Germany for example, rules that you can only keep personal data belonging to German citizens in specified areas deemed acceptable by the German government. It’s therefore important to ensure the technology provider can accommodate these needs. In terms of global scalability, this will be vital to your business.

Future Proof

The world is quickly adapting to the demands of the younger generations that crave instant gratification and are beginning to represent the majority of the workforce. If businesses are to remain relevant to those younger generations, attracting and retaining an agile workforce will be key. Businesses must think about how they too can adapt to better suit their lifestyles in the way the likes of PayPal, Uber and Monzo have forced whole industries to rethink the ways they operate.

While there are plenty of technologies emerging that are designed to help businesses address this very issue, it is essential that those technologies will deliver a return on investment, adding true value for both the organisation and the worker while providing simple integration, robust security and unlimited scalability.

 

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Flexible Payment and Financial Wellbeing

Alternative payment models will prove essential to businesses satisfying the increasing demands of the modern workforce says Simon Draper, co-founder of Hastee Pay.

Forward-thinking businesses understand that today’s workforce demands more in terms of workplace perks and rewards. While flexible working hours and remote working are generally considered perks, these are becoming more widespread and could soon enough be considered as standard as free teas and coffees. The question is, will these benchmark rewards really be enough to satisfy the younger, more demanding generations rising through the ranks? Will they be able to really promote the financial wellbeing? Will they be really capable to foster financial wellness? 

Millennials – and now centennials too – expect flexible, transparent, fast and mobile initiatives from employers. In all work environments including the growing gig economy, the duty of care that employers are obliged to deliver must change. Employers must extend that duty of care and consider how they can nurture financial wellbeing at work and outside it. 

According to the Employee Wellbeing Research report by the Reward & Employee Benefits Association, the implementation of carefully-formulated financial wellbeing strategies in UK workplaces grew by 20% between 2016 and 2017 and it looks likely that this trend will continue to grow.

So why should employers care, and how far should the duty of care extend of o? Some might argue that providing paid employment with fair workplace policies and a comfortable working environment should be enough to keep workforces satisfied. Ultimately it comes down to how much the employer wants to keep up with the evolution of workplace trends and see the correlation to help them attract, retain and motivate the best talent and demonstrate greater levels of productivity.

Some employers might be content with simply following the best practice trends as they emerge, but others will want to be seen as the leaders at the forefront, driving new trends in terms of financial wellbeing and employee satisfaction. For those that wish to be known as the leaders of the charge, it will be crucial to recognise the most pertinent daily struggles of their employees and explore proactive and practical ways to help provide some form of relief.

On the money

By extending their duty of care to cover the financial wellbeing of the workforce, employers can increase their appeal to new talent, retain existing personnel and ensure the best possible engagement from their workforce. Research from debt charity Step Change shows that financial troubles have a significant impact on mental health with 5,000 users of the charity’s online debt counselling service over one year showing signs of anxiety or depression.

The charity’s research also uncovered more worrying findings, showing a steep 34 percent rise in the number of under-25’s seeking help with high cost credit in the last two years.  With experts at Manpower Group predicting that by 2020 millennials (now aged 21-35) and Gen Z (aged 20 and younger) will make up more than half of the entire workforce, the financial wellbeing of employees has never been a more important factor.

Challenging the payroll cycle

Money is undisputedly the number one concern and driver on the minds of most employees. A study done by the American Psychological Association shows that 61 percent of respondents face poor mental health due to stress strictly linked to a lack of financial wellness. Whilst free drinks and a nice working environment can improve our work life experience (and a little PR), for most people money is understandably the reason to get out of bed in the morning.

However, the rising epidemic of financial insecurity has led to a reliance on risky payday lenders, with one in every ten UK employees utilising payday loans every year and 70 percent of those relying on payday loans on a regular basis according to research by The Guardian and Pews. And that’s before you take into account overdraft fees and the even more worrying and costly alternatives. Employers that can promote financial wellbeing can offer a safer, easier and more ethical solution built around those principles will find it easier to recruit, retain and engage talent.

By offering an alternative to payday loans, employers not only can increase the financial wellbeing at work, but they can encourage and reward productive behaviour, creating a positive multiplier effect for all parties to win; workers feel less stressed, resulting in greater productivity for employers. While many could be left scratching their heads over how this can be achieved, the answer is plain and simple. It’s time to disrupt the way people are paid and start to promote financial wellbeing. 

While monthly payroll works for the employer, it doesn’t always serve the worker. Beyond the demanding expectations and requirement for instant gratification within younger generations, employers must acknowledge the financial burdens that can so quickly intensify, even for the steady earners. Research from The Times shows that, at a time when both consumer debt and the cost of living are high, and real wages and savings are down, 33 percent of middleclass families are struggling to pay the bills and couldn’t cope with an unexpected £500 bill.

Employers still wondering why any responsibility should fall on them should take note that 38 percent of workers would move to a company that prioritises financial wellbeing within its workforce according to research by Barclays. Those that employ full time workforces and those that rely on shift, variable, gig and seasonal workers could see huge benefits from offering workers quicker and easier access to their pay. It has also been shown that there is a direct link between effort and reward that benefits both employer and worker which needs to be stable in order to keep alive the financial wellness.

Removing the struggle of individuals waiting long periods for pay that they have already earned no longer has to rely on businesses changing their payroll cycles and risking cashflow dilemmas. With new HR technologies available, businesses can embrace giving workers instant access to the wages that they have already earned with zero impact on companies’ cashflow. This means promoting financial wellness.

All of the evidence in favour of disrupting existing pay-cycles is there in plain sight but it’s down to employers to decide whether they want to adapt to the necessary demands of the modern workforce giving them the financial wellbeing that they want or sit back and watch as other businesses take strategic advantage and flourish through a stronger, happier and healthier workforce.  We can’t help but suspect that within a few years, we’ll look back and laugh when reminiscing on monthly pay the same as we do with CDs, Blockbuster video rentals and landline phones. 

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