FinTech HR: How Tech Will Transform People Management in 2023

FinTech is transforming the way many companies do business, with advanced technology making life easier for financial teams and consumers alike. But the next step is applying FinTech solutions to other areas—such as HR.

So, what exactly is FinTech HR? And how does the crossover benefit you and your employees? 
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The emergence of FinTech

FinTech is short for “financial technology,” which refers to the integration of technology into financial services. It describes any tech used to improve the delivery and use of these services, often involving automation.

FinTech originally applied to back-end systems for established financial institutions. Over time the sector has shifted toward consumer-oriented services that help solve challenges for individuals as well as businesses. Examples include mobile payments, banking apps, and cryptocurrency wallets.

The industry is heavily populated by startups aiming to disrupt finance through innovation, reducing operational costs, and increasing accessibility. Increasingly, these innovators are using machine learning, artificial intelligence, and predictive analytics.

The overlap between FinTech and HR

In most businesses, there is already some overlap between the finance and HR departments, typically for handling payroll and expenses, and budgeting for recruitment. But FinTech makes this crossover more effective.

Finance and Accounting

HR departments make sure everyone gets paid on time through payroll. Tools such as accounting software for small business finances automate the admin elements, so HR teams can focus on employee wellbeing.

But FinTech helps HR and accounting managers do more than handle salaries—it also enables them to take care of employees’ financial health. In an uncertain economic climate, FinTech HR solutions help you give staff more control over their finances.

For example, a company might allow flexible access to wages, provide online calculators for keeping track of earnings and pension contributions, and advise employees on money management through workshops and seminars.

FinTech tools could be incorporated into FinTech HR through the use of digital benefits platforms. These platforms allow employees to manage and access their benefits packages online, including health insurance, retirement plans, and other perks. FinTech HR could also leverage AI and machine learning to analyze employee data and provide personalized financial advice, such as recommending specific investments or helping employees set and track financial goals. By incorporating these types of tools, FinTech HR can improve overall employee financial wellness, leading to happier, more engaged employees and a more productive workforce.

Personal employee development

In fast-growing startups, managers are constantly taking on new hires—but in a rush to grow the business, you can’t forget about employee retention. Millennial hires, in particular, are looking for a nurturing company culture that includes opportunities for personal and professional development.

With effective overlap between HR and FinTech, you can provide more than a good salary with benefits. You can offer life skills that go beyond the workplace, including teaching employees to look after their finances and empowering them to do so with the right technology.

FinTech HR can support personal development through the integration of eLearning platforms into employee training programs. These platforms offer online courses and training sessions that employees can complete at their own pace, on a variety of topics including financial literacy, cybersecurity, and technology skills. By providing access to eLearning resources, employees can continuously develop their skills and knowledge, leading to better job performance and job satisfaction.

Companies can also offer training on how to use FinTech tools for personal and business use. FinTech HR can provide workshops and training sessions to teach employees how to use FinTech tools such as budgeting apps, investment platforms, and online payment systems. This not only helps employees manage their own finances better but also empowers them to use these tools in the workplace to streamline processes and increase productivity.

Finally, FinTech HR can offer employee benefits packages that include access or free subscriptions to innovative FinTech services. For example, a company could provide employees with access to financial planning software or investment management services as part of their benefits package. This not only helps employees manage their finances but also demonstrates the company's commitment to employee financial wellness, leading to a more engaged and loyal workforce.

Productivity and management

Many businesses use time-tracking tools so that employees can log their hours and get paid the right amount, and HR managers can see attendance. Since these tools are ultimately used to determine salary payments, this is another area of overlap between HR and FinTech.

For example, a time-tracking tool directly linked to your payroll system can streamline the whole process and provide full transparency. This makes it easier to track breaks and overtime and comply with labor laws. It’s important for employees to know they’ll be paid fairly for the work they do.

8 ways FinTech will transform HR in 2023

With workforces increasingly dispersed across locations and connected by mobile technology, it’s potentially more difficult for HR managers to monitor everyone’s wellbeing and productivity. The solution is to combine FinTech and HR technology in an expanded range of services.

• Payroll management

FinTech already helps organizations streamline their payroll processes. For example, you can make scheduled payments with a virtual account using open banking. Payroll tech gathers useful data for HR managers, including total salary, deductions, income history, and employee headcounts.

FinTech also makes the processes more inclusive and transparent for employers and employees. With payslip software everyone can access dynamic payroll data on past earnings or earnings per hour. Companies can generate payslips with automated tax calculations to avoid mistakes and stay compliant. Employees can access their password protected payslips at any time and from any location

Thanks to embedded banking through FinTech, employees can have their own deposit accounts to receive wages—internal disbursement is faster than standard payroll processing. They can also split payments between accounts, switch direct deposit accounts, and change tax withholdings.

• Benefits management

Benefits are essential for recruitment and retention. For example, according to a study by WTW, 39% of US employees see health benefits as a top reason for switching to a new job. Companies might offer cycle-to-work schemes, gym membership, or retail discounts—but staff don’t always understand how they work.

Today, employees expect flexible and transparent benefits, with guidance to help them see what they’re entitled to and how to use it. FinTech makes it easy for companies to provide a central, accessible platform with a single sign-in where staff can view, explore, and manage their benefits.

FinTech also brings flexibility for employers, who can choose how much they want to contribute to an employee’s pension plan and when, rather than having to pay upfront.

• Money lending or cash advances

There are around 23,000 payday lenders in the US (for context, that’s almost double the number of McDonald’s branches). Despite annual interest rates of up to 600%, a difficult economic climate means some workers have no choice but to use these providers.

However, with FinTech solutions, you can give them a better choice: to borrow money from your company instead, with loans based on wages. Since payroll data is available as an API, you’ll already have the information you need—such as income verification and salary history—to make lending decisions.

As well as educating staff about high-risk payday loans, your HR team can also use FinTech to help workers manage their expenditures and meet savings goals. If they don’t have to borrow in the first place, they’ll be less stressed and more productive.

• Same-day wage access

Employees paid by the hour are more likely to need quick access to their earnings. (They’re also more likely to quit and work for somebody else, so it’s worth looking after their needs). Companies like Uber and Lyft already enable gig workers and contractors to receive instant payment for a shift.

With FinTech, you can do the same. After pulling in the relevant data from HR technology, you can have the payroll company process wages and withholdings at the end of the day, and then make net pay available in an employee’s account.

Your payroll provider may also issue prepaid debit cards that enable card purchases and ATM withdrawals. Some businesses charge a percentage or flat fee for immediate access, but employees are typically willing to pay this additional cost.

• Digital taxation

Nobody enjoys doing their taxes, but FinTech (and its offshoot, TaxTech) helps to make things easier by automating aspects of taxation and helping businesses and employees to keep track of payments and withholdings.

For instance, open banking helps companies and individuals automate tax preparation and payment. The tools pull information directly from bank accounts, with no need to enter manual data. Real-time tax payments might even be a thing in the future.

TaxTech is all about increased digitization of tax tools, using advanced technologies like AI, ML, and data-driven analytics. One example is the UK’s Making Tax Digital initiative—learn more with the Sage MTD guide for accountants.

• Biometrics

Biometrics is a big part of FinTech, including touchless card payments and authentication for mobile banking apps. But it’s also used in HR, with biometric systems that record employee attendance via fingerprint scans (at a physical location or on mobile devices).

Managers can capture accurate, real-time workforce data and see how many hours a particular employee has worked. Employees will know their presence has been recorded, and can log in to company documents or workspaces with no need for remembering passwords.

It’s easy for HR departments to verify new applicants with facial or fingerprint scanning, reducing the need for initial background checks. These tools also enable remote interviews and onboarding, as there’s no need for the applicant to bring physical ID documents.

• Travel and expense tracking

FinTech makes it easier for employers and employees to view and monitor their expenses, meaning there’s less risk of errors or fraudulent claims. As well as greater visibility, it provides automation that reduces the need for manual checks—so you can process claims faster.

Currently, 2 in 3 employees in the US use their own money to pay for work-related expenses, averaging $111 a month. It’s a similar situation in the UK with nearly 6.9 million British workers using their own money upfront to cover expenses. And, it often takes weeks before companies reimburse employees, thanks to a clunky process of submitting receipts and awaiting approval.

FinTech infrastructure improves the experience for everyone, often providing corporate cards so that employees don’t have to use their own cash. Finance teams can customize spending limits, and access real-time data from the system.

• Investment options 

The crossover between FinTech and HR also helps you to offer investment advice and options to employees. Embedded finance technology allows workers to invest straight from their pay, meaning it’s saved before they can spend it.

For example, the pensions redirect scheme in the UK means employees can choose to have any pension contributions over and above the minimum standard paid into an easy-access savings account. You could also team up with financial advisors for coaching on investments, retirement, and estate planning.
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The takeaway

Most people are already familiar with managing personal finances through technology. FinTech HR offers similar control over earnings and benefits—as well as making work less stressful for HR teams. Employees can easily log their hours, access wages quickly, and make changes to contributions or investments.

This approach also encourages improved budgeting and savings habits. Employees who feel secure about their financial situation are more likely to be happy in the workplace—which is what HR aims to achieve.