I'm trying to think of the business use-cases (TAM) where connections to debt repayments is more value-able then the current solution:
1) Personal Finance Manager's like GradJoy/Mint, definitely make sense, where the PFM knows about all my debts and helps me orchestrate payments between them. :)
2) Maybe a gofundme/honeyfund where people can "gift" someone money but it has to go directly to paying down debt? For example: Grandma knows you have student loans, wants to help, but wants to restrict where the money goes.
3) Are there apps where I earn money (gig economy, mechanical turk, etc) and it is somehow better (?) to have the money go directly to paying off my debt and NOT going into my bank account? I think the loss in flexibility about my wages would make this usecase a poor fit, unless there were other incentives attached to it. For example: instead of getting $5 to you bank account, you'll get $5.50 to pay down debt - like a 401k match for debt. Note: I'm not saying that employers can/should do this, just thinking out loud.
Definitely #1 (and #2 to an extent) is a straight forward solution. We have seen some interest in #3, but mostly due to the gratification of getting your debt paid down without you thinking about it. We are working companies that offer employee unique employee WFH perks such as mortgage repayment or electricity repayment as a benefit.
Some other verticals that we have seen benefit from direct connections to debt include: Lenders (Personal loans, credit cards, mortgages) and Fintechs (BNPL, Crypto, PFMS)
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I could see payroll providers offering it as an option, similar to sending money to retirement plans, post-tax insurance, charitable contributions, etc. I have seen payroll plans that purchase goods either up front or on layaway.
This is how it works by default in New Zealand, and it works quite well in my opinion.
If you have a student loan then your tax code changes and student loan repayments are deducted from your pay like payroll taxes, at a rate 12% of every dollar you earn over the repayment threshold (~$20k NZD annually). In effect (combined with Kiwisaver, our retirement savings plan deducted at the same time) this means that you don't really need to think about your student loan when earning wages or a salary as your take home pay already accounts for this.
You can add manual repayments, but this is seldom done in NZ as student loans are interest free under certain conditions so there is less incentive to repay them quickly.
That's really interesting perspective, I had no idea that's how it worked in NZ. I suppose it works seamlessly in NZ as the loans are originated by the the NZ government. Could be interesting if student loan services in the US offered a BPS discount if the payment auto deducted from a paycheck.
1) Personal Finance Manager's like GradJoy/Mint, definitely make sense, where the PFM knows about all my debts and helps me orchestrate payments between them. :)
2) Maybe a gofundme/honeyfund where people can "gift" someone money but it has to go directly to paying down debt? For example: Grandma knows you have student loans, wants to help, but wants to restrict where the money goes.
3) Are there apps where I earn money (gig economy, mechanical turk, etc) and it is somehow better (?) to have the money go directly to paying off my debt and NOT going into my bank account? I think the loss in flexibility about my wages would make this usecase a poor fit, unless there were other incentives attached to it. For example: instead of getting $5 to you bank account, you'll get $5.50 to pay down debt - like a 401k match for debt. Note: I'm not saying that employers can/should do this, just thinking out loud.