What is Earned Wage Access and how does it help employees? With Kalkine, the clearing house and more

It’s very easy for many new to the fintech space to think that fintech is an exclusive term for payments technology, and while there’s some truth to that, it doesn’t tell the whole story. history of fintech. However, in June, Fintech time seeks to indulge this belief as we seek to discuss hot topics regarding both sending and receiving payments, such as Buy Now Pay Later (BNPL), First Paydays and more.

Amid the skyrocketing cost of living and growing gig workforce, access to earned wages (EWA) has become more of a necessity than a luxury. This idea of ​​“by the minute” access to salaries has become a serious topic in the wider world of paid tech, as getting paid weekly or hourly continues to lose popularity.

An analysis of the subject in 2021 by 60 decibels and charity-backed fintech service Wagestream confirmed this shifting appetite for access to wages, with the joint study revealing how up to nine in 10 workers want their employer to remove the locked monthly pay cycle.

The same study identified employers currently offering an EWA as part of a financial wellness policy, which includes bupa, brew dog, J.D. Sports, Pizza Hut, Leon, Virgin Care, Head of the road and the NHS.

It’s clear that the space around EWA is getting more and more pronounced, and the industry can expect to see even more developments in this exciting form of technology over the next year.

With that in mind, we invited four payment technology experts to define what EWA means to them and how they see it bringing benefits to both employers and employees.

Kunal Sawhney

First of all, we have Kunal Sawneythe CEO of Kalkinwho views EWA as an appropriate remedy for increasing levels of financial stress: “EWA is a program in which employees can access a portion of their accrued but unpaid salary at any time prior to the actual payday.

“EWA is very useful for employees who are going through financial difficulties. Most of the employees who want to take advantage of the EWA are millennials. Employees going through a financial crisis can go through tough times with EWA. They can save big on additional penalties for late payments, high interest to lenders for emergency loans, and bank overdraft fees.

“According to a watercraft report, 50% of employees spend three hours a week worrying about their finances. Is salary finance the new personal loan? Although a payday loan and payroll financing have the same goal of freeing a needy employee from the grip of a financial constraint, their modus operandi vary. Salary Finance is a new way for employees to withdraw money from their accrued (but unpaid) salary. However, a payday loan is a short-term loan that an employee takes out from any lender at a very high interest rate.

Jim Colassano, SVP, Product Development and Strategy at The Clearing House
jim colassano

jim colassanoSVP, Product Development and Strategy at The Clearing Accommodationexplains how EWA helps employers appear more attractive while enabling them to attract new levels of talent: “Pay-as-you-go and EWA have become important perks for many employees and a recruitment and retention tool for employers.

“It helps employees because it gives them access to money they’ve already earned (but haven’t yet received during the normal payroll cycle) when and if they need it. It helps workers deal with unexpected expenses, like an emergency car repair, without having to dip into their savings or rely on credit. »

Jim reinforces his point by providing real-life examples of pay technology in action: “There are many examples of pay-on-demand and EWA, many of which are paid in real-time over the RTP network:

“The economy of the gig: Uber and Grubhub, to name just two gig companies, allow drivers and couriers to cash in instantly. Drivers/couriers can receive their earnings directly into their bank account at any time, and some drivers or couriers actually receive their wages into their bank account several times a day. These payments, often via the RTP network, allow the worker to control exactly when they want to be paid.

“Retail/services industry: With a tight labor market, retailers and restaurants, for example, are beginning to allow workers to be paid whenever they want. EWA is an important benefit for employees and allows them access to earned wages when needed.Some fast food chains entice employees with promotions that say “work today, get paid today.”

“Retailers, like walmart, Kroger and Dollar Treealso offer instant payment options. Daily Pay, payactiv, Payfare and Payment are some of the payroll providers that offer instant payment on the RTP network. »

Yusuf Ozdalga, London Partner, QED Investors
Yusuf Ozdalga

Yusuf OzdalgaPartner and Head of UK and Europe for CQFD Investorsidentifies how EWA enables a higher level of financial freedom: “Data tells us that more than half of workers in the UK and US are working paycheck to paycheque, which means that they have less than £300 left in their bank account at the end of each month.

“This causes enormous stress for these workers, and knowing that they can access their already earned wages creates an element of security. If their car breaks down and they need £200 to fix it to get to work, they would once have had to have a stressful conversation with their loved ones, ask for money or, in the worst case scenario, s go to a predatory lender. . With EWA, they can withdraw the money they have already earned and do it instantly, without any approval.

“It is important to note that EWA works best when the unexpected cash requirement is less than the monthly disposable income. So, for example, if I need £200 to fix my car like in the example above, and my disposable income for the month will be £400, EWA makes a lot of sense.

“If, on the other hand, my unexpected need is £2,000, I would need a responsible lender to step in with a cost-effective, customer-friendly installment plan to lend me that money over several months, paying it back through installments over time.”

Fidelma McGuirk, CEO and Founder of Payslip
Fidelma McGuirk

Concluding our discussion, Fidelma McGuirkCEO and Founder of Payslipgoes further than highlighting the benefits of EWA, outlining the practical implications of its implementation: “EWA enables company employees to access their salaries and wages at multiple points in a work month per opposed to a fixed single payment at the end of the month, for example the traditional payday.

“Employees around the world earn their wages while they work and the EWA operates with the idea that they should then be able to access it the moment they earn it.

“The implications for the wage bill are significant. This would involve significant complexity and potential compliance issues. They should partner with a payment company or fintech provider that makes it easy for them to release funds to employee bank accounts multiple times within a business month.

“It also has implications for HR who should decide what kind of company policy to implement on this, for example, how many days in a particular month are they willing to release payments for EWA.”

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