The Convergence (Disruption?) of HCM Technology and Fintech
I’ve been spending a lot of time on payroll in the past year, and one of the things that has caught my attention is the potential for financial market disruption by the HR technology space. Companies like ADP, Ceridian, Ultimate Software, Paychex, and others move trillions of dollars around the country and the world every month. And increasingly, employers are looking to provide services around the payroll experience beyond the traditional retirement investing. Benefits such as student loan repayment, pay cards, and even direct bill paying are rising in popularity. All of which could have payroll providers acting increasingly like banks.
But there is also potential for Fintech (the catchall term for organizations providing financial services enabled by modern technology) to disrupt not only traditional financial services but also the HCM space. Several of these players are offering solutions either aimed directly at employers, or as alternatives to employer based savings and retirement options. However, one can easily see the potential for the combined disruptive power of the sheer number of customers payroll providers have access to, along with these new technologies offering a better employee experience, but without the traditional expense to employers.
Below is just a sampling of players potentially worth watching.
CommonBond. CommonBond is a student loan originator, servicer, and refinance provider, aimed at the millennial market. Their goal is to simplify student lending and lower its costs for the next generation of the workforce. But they have recently launched CommonBond For Business, designed as a “no headaches” benefit employers can offer to help employees refinance, budget for, and even contribute to the repayment of, their student loans. The product is clearly being promoted as a tool to attract talent for employers. With predictions of changes to student loan regulations making student loan refinance less financially attractive, we can assume that heavy emphasis on B2B may be the future for CommonBond.
Acorns. Acorns is a app designed to introduce millennials and nontraditional investors to the stock market by making micro investments with their spare change. Their recent acquisition of Vault, a retirement investing play, puts them squarely in the traditional employee benefits space. The new product, called Acorns Later, has not been unveiled, but Acorns’ appealing app, millennial focus, and its own content channel called Grow magazine could make it an interesting retirement investing alternative to millennials that feel their company’s 401(k) is out of touch.
Revolut. Revolut started in London as a tool to help manage individual finance across currencies and borders throughout Europe. They have recently announced plans to launch in the US in early 2018 with personal accounts allowing individuals to take transfers between the Eurozone, UK and US, making them very attractive for ex-pats working globally. They also recently launched Revolut for Business, enabling organizations to operate in multiple currencies and avoid transaction fees. They offer expense management with multicurrency credit cards that are tied to actual market rates, and help speed reimbursement in the correct currency.
There are plenty of players coming at this from both the financial services side, and the human capital technology side. But it’s potential for disruption, as well as the huge dollar amount at stake, make this a spot worth watching.
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