The payments technology landscape is evolving fast and furiously to revolutionise consumers’ lives without introducing friction to their everyday transactions.
While money can be transferred instantly via apps like Venmo and Zelle and consumers can order groceries on-demand from their cell phones, payroll processes aren’t keeping up with the times. The frequency of how employees are paid is mainly untouched, unquestioned and unrevolutionised. As technology continues to reshape the way we pay, it’s also can reshape the way we get paid.
Earned wage access (EWA) solutions allow people to get ahold of their pay right after it is earned, rather than waiting on the traditional bi-weekly paycheck or 15th or the 30th bank deposit. It benefits both employers and employees. Many predict this modern payment method will soon become the norm.
Making companies more attractive to prospects and employees
EWA is built to be offered by employers as a benefit to their workers. But it has advantages for employers, too.
Companies adopting EWA can reduce the costs associated with processing payroll, including printing and mailing paychecks, by giving workers their own company-issued debit cards instead. The card works just like a direct deposit to a bank, giving the employee instant access to the funds once transferred. EWA won’t negatively affect a company’s bottom line; a handful of good solutions are available at no cost to the employer or the employee – a win-win.
Flexible pay also helps attract and retain employees. According to a 2021 American Banker survey, more than half (56%) of adults surveyed had used EWA in the previous 12 months, showing more employees are becoming familiar with the solution. The survey also found that EWA is a solid recruiting tool and that most people who use the benefit choose to receive their funds the same day.
Further, offering EWA can complement financial wellness tools and education by including helpful budgeting and savings information. This helps empower workers to gain greater control and visibility of their finances and expand their financial literacy.
Interestingly, workers aged 25 or younger are nearly twice as likely to want financial planning services as employees who are 56 and older. Employers who provide financial literacy education that includes tools like EWA are becoming more attractive.
Workers gain flexibility and financial freedom
Employees using EWA have greater financial freedom. They can simply swipe their card just like a debit or credit card or use an accompanying app that allows them to see how much money is available. They can even use the app to pay bills or send money – all without the added step of transferring funds to their bank accounts.
Employment law firm Fisher Phillips recently reported that of the companies that offer EWA as part of their compensation packages, 89% of employees say they’re more productive and motivated at work by knowing they can get ahold of their pay before payday, with 74% having fewer unplanned absences.
EWA also is attractive to gig workers who have even higher expectations around flexibility in various areas – from setting their own hours to how they’re paid. Given the demand for talent, freelancers are becoming even more attractive to employers. Gartner estimates gig workers comprise 15%-25% of today’s workforce and will make of 35%-40% of all employees by 2025. EWA satisfies their need to get paid immediately.
Future expectations of people who bank
Since the on-demand economy is here and now, it’s critical for companies to innovate to stay ahead of the competition. Paying people to fit an old pay model no longer serves a purpose in an on-demand economy. Over the past 50 years, our world has experienced many fintech innovations like ATMs, credit cards, bank transfers and mobile check depositing.
Traditionalists and nay-sayers once met these innovations with scepticism, but these are ways most people bank today. Recent surveys found that 30% of Gen Z, who are entering the workforce, have never written a check before.
EWA is today and tomorrow’s way to pay – and not just hourly or gig workers. We’re going to witness greater awareness of this fintech solution, with more workers asking for it and more employers offering it. EWA will become the way we get paid, spend and bank.
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About the Author: Brian Brinkley has over 30 years of experience in enterprise and start-ups. He is a leader in omnichannel commerce and digital payments technology. Brian founded Zave Networks which was acquired by Google in 2011 and became a key component of Google Wallet. Brian has held executive roles at Sprint PCS and Lucent Technologies. Brian joined QRails as CTO in 2019 and was asked to lead QRails growth strategy as CEO in 2021.