A UK fintech Borofree is to launch an app trialed in Scotland that offers interest-free salary advances.
Supported by £15m from lead investor Fortunis Capital in collaboration with other investors such as the British Business Bank Future Fund, the fintech said its ambition is to help people escape crippling debt through £1.2bin of recurring lending with zero charges.
Staff at employers who sign up can spend up to £300 of their next wage at leading retailers, in person or online.
Unlike payday loan companies who charge up to 1500% APR, customers pay no interest and no fees.
Borofree have already secured more than 60 major brands, including Amazon, Uber, Morrisons, Tesco, Currys PC World, Sky, Just Eat, John Lewis, and The National Trust.
The Borofree app launches next month with the ambition of helping 1,000,000 customers by December.
Fintech entrepreneur Minck Hermans, chief executive officer of Borofree, said their mission is to give consumers back control of their finances by disrupting an outdated personal finance market that creates a “vicious cycle of debt through punitive interest”.
He said: “Now is the time to solve one of the UK’s biggest problems. Half of households cannot pay an unexpected bill of £300 – while financial worries are the biggest mental health burden of Covid-19.
“We are unique in the market in that our model is not founded on charging hard-pressed families exorbitant interest rates.
“Many people are forced to borrow at high interest rates to pay for the essentials in life and we fundamentally believe that is wrong.
“Interest is the enemy and together we must fight to eradicate it, especially for those who cannot afford to pay such high costs but have to use credit to make ends meet.”
Borofree there is significant interest from employers interested in signing up pre-launch. Hermans added: “Every company leader we speak to recognises alleviating financial stress helps improve productivity, reduce absences and increases wellbeing. Above all, it is the right thing to do.”
He said Borofree was ahead of the curve in the sharing economy.
“Existing legacy systems are complex, inefficient and undated. It is wrong that consumers pay the price for that inefficiency through unfair interest rates, whether that is bank card charges or payday loans.
“We want to break the old model and release millions from the burden of interest-driven debt.”
Borofree trialled successfully in the UK under the Karma brand, supported by lead investor Fortunis Capital, alongside British Business Bank Future Fund and the Scottish Government.
It graduated from the Financial Conduct Authority’s sandbox programme, which tests new products in a regulatory framework.
Justin MacRae, chief operating officer of Fortunis Capital, said that there was global potential for Borofree.
In the UK, they have identified a potential customer base of 27 million which includes JAMS – those ‘just about managing’ – who regularly have to borrow at high interest rates for basics such as food and heating.
MacRae said: “Borofree is one of the jewels in our crown. It fits with the mission of Fortunis Capital as a leading impact investor – addressing a global problem that affects millions of lives and then finding the solution through innovation and tech.”
“In this case, a movement to wipe out that vicious circle of debt that enslaves families.
“That first 1,000,000 is a milestone, but the market here in the UK and abroad is massive and the next target is to help more and more people escape debt and into financial wellness through the provision of £3.6bn of lending with zero charges.