David Brown believes he has found a solution to the tricky problem faced by chancellor Rishi Sunak in weaning businesses off billions of pounds of furlough cash while safeguarding jobs.

Called pay asset finance, it also promises to reconcile an inequity at the heart of the payroll system, which Brown says “imprisons both employers and employees”.

So, what’s he getting at?

Well, workers are usually paid in arrears, which means they only get their hands on what they’ve earned at the end of the month.

Yet, poorer households often require funds before the payroll run, and turn to payday lenders, or juggle credit cards to bridge the gap, incurring punitive rates of interest in the process.

Brown’s company Hi55 Ventures has come up with Hi, a fintech solution which borrows heavily from traditional asset finance to provide employees access to their earnings weekly, or even daily.

Hi also allows employers to defer salary payments out to 60-90 days as they normally with contractors and suppliers. In doing so, companies can stagger cash outflows, smoothing out the month to month pressure on working capital.

Hi55 has partnered with the Japanese telecoms giant NTT, while it has a GBP5bn funding term sheet from one of the world’s biggest private credit providers. “The fact we have got it [the term sheet] is testament to what we are doing,” says Brown.

But how does Hi, or the concept of pay asset finance, have a bearing on the jobs nightmare that will inevitably result from the withdrawal of state support such as the furlough scheme?

Helping business

Well, Brown’s approach would be backstopped by the National Insurance Fund, which pays out GBP538 a week per employee for up to two months if businesses become insolvent.

This would then give a guarantee that could be used to provide capital for businesses under pressure, without the need for credit checks, while mitigating the requirement for big job cuts.

The estimated cost would be low, much lower cost than making an employee redundant – and as a recent Sunday Times article points says: “It is financial engineering, but it appears to work — and, as the scheme’s designers point out, it would not add to either government or business debt.”

Mass unemployment, so far staved off by Mr Monopoly-style handouts from chancellor Sunak, could prolong and radically deepen the current recession.

The Institute for Fiscal Studies foresees the unemployment rate almost doubling to 8-8.5% by the first quarter of next year, while some City banks reckon it is heading closer to 10% in 2021.

That’s a lot of unemployment benefit to be handed out and billions more in tax income lost to the Treasury.

Deafening silence from Treasury

While Brown’s approach has piqued the interest of former chancellor Norman Lamont, thus far the silence from the Treasury has been deafening.

That said, Brown and his team have plenty on their plate priming Hi for its commercial deployment – both for use in small- and mid-sized companies (SMEs) and large corporates.

To that end, the technology is currently being used in both settings – at Hi and NTT.

Having the backing of one of the world’s largest technology groups has mitigated the start-up company risk that might prevent the adoption of Hi, says Brown.

Heavyweight backing

That’s because the technology will exist on a payroll marketplace hosted by NTT, which has APIs (application programming interfaces, or links) into popular accounting software packages such as Sage and Xero, while allowing payroll companies to connect too.

Hi55 estimates it can generate GBP150mln a year in revenues deploying the GBP5bn for which outline terms have been agreed.

It will do this by charging companies a fee per employee of GBP1.50-GBP5.00 per month, while the funding providers will pay upwards of 0.25% a year on the loans originated on the platform.

Brown is clear – workers will incur absolutely no costs. “We think it’s morally corrupt to charge an employee to access their own wages,” he adds.

The company is currently looking to raise up to GBP5mln on a GBP25mln pre-money valuation ahead of a possible London float.

IPO on the cards?

A “major broker” has advised Brown that Hi will be ready to list in the third quarter of next year and there have also been what he describes as “early days discussions” about reversing into a cash shell already listed on the stock exchange.

However, all of this will no doubt take second place to the main task at hand: developing this new, but thus far untapped segment of the trillion-dollar asset finance market called pay asset finance.

Oh, and there’s a broader goal here too. “We want to make the world financially stronger, by making the employer and the employee financially stronger,” says the Hi55 founder. “This is how this whole idea started out.”

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