Australians still lack financial wellness, and Wisr is looking to change that
Financial wellness is defined as a relative measure of how well a person manages their financial life and sadly many Australians are struggling in this aspect of their lives.
Research and consulting firm Gartner noted in its HR Survey in mid-July that financial wellness is at an all-time low for Australian employees, falling for the second consecutive quarter from 28% to 24.4% for the March 2023 quarter.
While a significant part of this drop is attributed to rising interest rates and cost of living pressures, financial education (or the lack thereof) also plays a significant role in managing ones’ finances.
Indeed, financial wellness is considered to be important enough by consumer lender Wisr (ASX:WZR) that it has centred its entire business around the concept.
“Financial wellness is about education, empowerment and really understanding what your options are, what your choices are and what you can do depending on what your objectives are,” chief financial officer Andrew Goodwin told Stockhead.
“It is all about understanding how money works, why we make the decisions that we make and what debt means.”
Sadly, Australians don’t seem to be learning about financial wellness at home or in school, which Goodwin said could become a lifelong problem.
“There does seem to be a gap in the knowledge base of I’d say most Australians.”
Wisr is so focused on financial wellness that rather than just building a lending business, it has chosen to develop two platforms – one for digital lending and the other for financial wellness.
The company’s free to use financial wellness platform is aimed at improving its customers financial health and wellbeing.
Its Wisr Today app seeks to achieve this goal through daily habit coaching to drive behaviour change.
One of the ways it seeks to do so is to address common daily spending habits in a bid to get users to save more.
And it is already starting to pay off with the company’s data indicating that even a single habit change could deliver savings of between $3,000 and $11,000 per annum, which is certainly not an inconsequential change especially at a time of rising cost of living pressures.
“Well informed and educated people tend to be better customers because they recognise the importance of financial wellness,” Goodwin noted.
“Obviously, we lend responsibly, but if you do borrow, do so at a fair price for an amount that you can afford to pay back to do something that you want to do whether that is buying a car or whatever the case might be.
“People realise that when you pay back your debt, it makes it easier down the track where you need to get more debt because it gives you options, whereas obviously having a bad credit history, does create problems for you down the track that are best avoided.”
And it seems that Australians are starting to see the light.
Wisr already has more than 750,000 profiles on the platform, though the company is still investing in the platform as it is still early in its journey.
The company’s decision to build what is essentially a purpose-led business centred around financial wellness is also due to recent developments in the financial sector.
“What we saw in the last five years or so with the Royal Commission that we needed people and businesses providing financial services in a differentiated and dare I say it ethical way,” Goodwin added.
“We also looked at the historical model of lending – basically followed by the big four banks of Australia – where they give someone a loan, they direct debit their account every month for five years and that’s sort of the end of the conversation, and thought that there was a better way for a customer going on that journey in an actually more empowering way.”
He added that purpose-led businesses also tend to outperform historically while the focus on financial wellness has also been hugely popular with its staff.
The Wisr Today app. Pic: Supplied (WZR).
Of course, any business is set up to deliver returns to their owners and/or shareholders and Wisr is no exception.
Whilst its focus on building two platforms has increased costs, it has not stopped the company from building a $931m loan book and delivering about $100m in annualised revenue.
“We could have run the business in a much cheaper way, but we’re trying to build something very big and significant and that takes time and investment,” Goodwin noted.
And it is a strategy that is clearly working, allowing Wisr to deliver a profit in the fourth quarter ending 30 June 2023 with earnings before interest, taxes, depreciation, and amortisation of $900,000.
So just what is the secret behind this growth?
The company is a prime lender that essentially provides loans to the same type of customers that would normally be accepted by the major banks.
And while Wisr doesn’t offer the cheapest rates, it isn’t the most expensive either with Goodwin noting that there’s always competitive tension in the market and as such, competitive considerations are certainly relevant.
“In terms of lending, we will lend to anyone who wants to borrow provided that it is within our credit policy, we are doing it responsibly and we are doing fairly,” he added.
Wisr is also aware that as a lending business, it really needs to get to scale and that it requires doing so in a very cost effective way.
Here is where the company’s financial wellness platform is starting to play an increasingly valuable role.
Besides increasing customer financial wellness through education, the platform also serves as a distribution channel that Wisr owns.
“Basically anyone that’s on the financial wellness platform, for example, they might be checking their credit score, we can offer them products from our lending platform to convert them into a lending customer,” Goodwin explained.
“The financial wellness platform gives us a communication platform distribution channel for our lending product with all the users that are on that (wellness) platform.
“I think the financial wellness platform does help attract some customers to Wisr that we wouldn’t otherwise get and over the medium to longer term, the strategy is expected to enable us to scale in the most profitable way.”
In the short-term, Wisr remains focused on maintaining its strong balance sheet, moderated growth and profitability.
“These are the things that we delivered in Q4 and we want to continue delivering,” Goodwin pointed out.
He added that in the longer term, the company was hoping to see more stability in the broader macroeconomic environment.
“We want to see the rate cycle at least plateau and for inflation to come down a bit. We are waiting for a more stable operating environment before we look to scale again,” Goodwin said.
“In the next three to five years, we want to build a highly profitable company with a multi-billion dollar loan book across multiple lending products while still remaining true and focused to the financial wellness purpose.
“Financial wellness is very important to us.”
This article was developed in collaboration with Wisr Limited, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.