An Alternative to Begging the Boss for an Advance

(Bloomberg Businessweek) -- As the owner of 19 sporting goods stores and shoe shops in the Indian city of Bilaspur, Ankur Behal had grown weary of entreaties from some of his 300 workers asking for financial assistance to tide them over to the next payday. So in February he signed his employees on with a startup called Refyne, which offers users quick and easy advances. “That headache’s gone away,” he says. “The workers feel in control of their finances, they can budget, spend, save, and track their money.”

Millions of India’s salaried workers live paycheck to paycheck and have difficulty covering unexpected health-care emergencies or family expenses—and sometimes even their rent. When these people get into a bind, they often ask their boss for an advance.

Refyne offers an alternative, partnering with businesses in dozens of cities across India. Its software plugs into the employer’s attendance and payroll systems and gives staff access to their pro-rated salary at any point before payday. Companies pay nothing, and transaction fees—deducted upfront from users—start at 6 rupees (8¢) for a 300-rupee withdrawal and are capped at 199 rupees for advances of as much as 30,000 rupees.

The company was founded by Apoorv Kumar, 30, a former analyst at Goldman Sachs Group Inc., and Chitresh Sharma, 31, a marketing specialist who started his first company in Scotland while studying. Sensing an opportunity in India’s broken credit system, the two opened Refyne last December with $4 million in financing from venture capital investors, and in July they raised an additional $16 million. More than 700,000 workers from 150 companies—retailers, restaurants, and more—have signed up, and Refyne aims to expand that to 1 million by yearend.

India has a dire need for newer financial models to replace unregulated moneylenders, both on- and offline, says Monica Jasuja, a digital payments strategist at mobile phone services company Comviva Technologies. While regulated lenders charge around 18% per annum, many laborers in India are intimidated by banks and the paperwork they require. So they turn to local loan sharks or newer apps that typically demand homes, land, or jewelry as collateral and charge interest that can exceed 300% per year. “People don’t grasp the mechanics of interest rates or penalties,” Jasuja says. “Before they know it, they’re deep in debt and paying huge sums.”

The antagonism toward lenders is evident when Refyne stages events to introduce the app, says co-founder Kumar, who sometimes struggles to make users understand that his offering is different, with no monthly payments to track, no interest, and no penalties. “People don’t trust any financial entity,” he says. “Payday lending and microfinance are a multibillion-dollar industry in India, and we are the exact opposite.”

The app, in nine Indian languages, allows users to quickly check their available funds and make a withdrawal, which is instantly credited to their bank account. Sudhir Kumar Yadav, a vending machine salesman for the Café Coffee Day chain, says he took out 3,000 rupees in June to travel to his village and cover expenses associated with the trip, paying a total of 110 rupees—about 3.7%, vs. the 5% monthly interest he’d have to pay a local pawnshop. “My days of borrowing from these shops are over,” says Yadav, and he’s even sworn off hitting up friends when he’s in a bind. “Who wants to be known,” he says, “as the guy who keeps asking for money?”

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