Sep 5, 2023

Fintech-powered earned wage access (EWA) has been gathering momentum for nearly a decade, enabling cash-strapped workers to receive a portion of their wages before the usual biweekly payday through digital channels. In that time, EWA has become a hotbed of innovation as fintechs continue to increase the speed and convenience of receiving funds. But EWA products are also generating controversy, with consumer advocates claiming frequent usage of certain fee-based EWA services can cost almost as much as a digital payday loan . Financial services regulators in California and some other states are leaning toward classifying EWA products as loans, enabling them to cast a broad consumer-protection net. But Nevada and Missouri recently passed laws stating that EWA products are not loans, on the basis that EWA funds don't meet the formal definition of a loan. Experts say clashing definitions of EWA funds could create complexity for employers operating in multiple states. Many fintechs work directly with payroll firms or employers — Walmart is one example — to offer EWA services for free. Others charge a fee ranging from about $1.99 to about $4.99 for each wage-advancement. A handful of other fintechs market EWA products directly to consumers, a practice that consumer advocates fear could lead to misuse due to providers' inability to directly verify participants' income. Recent data from Sapient Insights Group suggests at least 13% of employers offer earned wage access to workers, and about 30% are planning to do so, as consumer demand for immediate wages rises. "New technologies such as faster payments, real-time updates and digital accounts can help people manage their money with minimal disruption, and these technological advances are helping EWA users," said Brian Tate, CEO and president of the Innovative Payments Association, a trade group based in Washington, D.C. Last week, the organization launched a website, EarnedWageAccess.info, to raise awareness of the expanding industry. Here are some recent innovations and milestones of leading U.S. EWA providers. DailyPay, banks collaborate on white-label EWA for corporate clients DailyPay, a New York-based fintech, began working with employers to offer workers EWA when the company launched in 2015. After developing significant momentum with thousands of companies, DailyPay expanded last year by offering its services on a white-label basis to banks. PNC initially partnered with DailyPay in February 2022 to support PNC EarnedIt, powered by DailyPay, which taps into companies' payroll and time-management systems to convert hours employees have worked into net earnings. Workers use a mobile app to choose which account to link for their EWA funds. TD Bank signed on to provide DailyPay to corporate customers in September 2022, and Santander Bank became the third U.S. bank to partner with DailyPay in April of this year. When banks partner with DailyPay, they may refer corporate customers to the fintech or work with DailyPay to develop a private-label version of its EWA service under the bank's name. DailyPay can customize services to meet clients' individual regulatory requirements, according to a DailyPay spokesperson. Banks can opt to embed DailyPay's EWA functions in their existing platforms via an application programming interface. Banks also can promote their own spending and card accounts when users set up EWA through DailyPay, which also funds the EWA transfers. Separate from its work with banks, DailyPay continues to offer EWA services to workers through employer partnerships. Workers can receive EWA funds free within 1-3 days via ACH, or assign their direct deposit to a reloadable debit card called Friday by DailyPay . Otherwise, DailyPay charges a fee of $3.49 each time a worker requests to send EWA wages instantly to a card or account. ZayZoon President and Co-Founder Tate Hackert. ZayZoon adds engagement tools for employers Calgary, Canada-based ZayZoon, which provides EWA services through employers at more than 40,000 U.S. worksite locations, last month launched a platform called Connect. This product is designed to help employers educate and track workers' use of third-party benefits, including EWA. Employers can use Connect to track workers' engagement with ZayZoon and other employer benefits and services they provide. The self-serve platform offers financial wellness information and money-management modules, along with autonomous tools for employers to post workplace policies and provide special recognition for workers, along with rewards and surveys. During a test period, employers in the quick-serve restaurant and hospitality industry, along with health care and manufacturing companies, had the highest adoption of the platform, ZayZoon said. "Armed now with data on how often employees take EWA payouts, human-resource teams can get a glimpse into what their employees are grappling with day-to-day, and how it might affect them on the job," said Tate Hackert, ZayZoon's president and co-founder. Workers at Marriott-branded hotels employed by Kana Hotel Group ask for wage advances that average $110 each. Andrew Harrer/Bloomberg Immediate attracts investors by promoting its own data Birmingham, Alabama-based Immediate, which launched its ImmediatePay EWA service in 2018, used deep data about its EWA product and how workers use it to secure a $16 million round of funding in July. The company plans to use the funds to expand its EWA reach to a total of 1 million U.S. users by 2025, said founder and CEO Matt Pierce, who leads a team of 50 employees. The firm measures employee engagement on an ongoing basis, helping to fine tune its products and demonstrate how EWA reduces employee turnover. The company offers free EWA transfers through an Immediate-branded debit card. Users can also pay a flat $3 to instantly transfer money to any other type of bank account. Workers may also earn a free EWA transfer for referring a friend to use the service. In one case study, Knoxville, Tennessee-based Kana Hotel Group, which has more than 300 employees spread across 55 hotels in the Southeast, signed up with Immediate two years ago and 39% of the workforce immediately opted to be eligible for EWA service. Workers at Kana Hotel Group-operated Marriott, Hilton and IHG locations have since initiated more than 38,000 ImmediatePay transfers, averaging $110 each. Eighty-five percent of users said they used the EWA advance to meet an urgent need. CVS offers a 7% bonus to people who access their wages on a gift card from ZayZoon. David Paul Morris/Bloomberg Gift card payouts accelerate EWA access A few years ago, New York City-based digital gift card platform Prizeout was busy scaling its system to distribute cash payouts via merchant-specific gift cards when an EWA provider came knocking. Prizeout, founded in 2019, rapidly developed an approach to blend the two concepts, enabling workers to receive wage advances in the form of a merchant-specific gift card. ZayZoon became the first EWA provider to test the waters with gift card payouts last year, offering workers who access its services through employers the option to receive funds instantly through digital gift cards from big-box merchants including Walmart, with a bonus. Merchants welcome being reimbursed for the full amount of the gift card immediately, and consumers appreciate getting a bonus above the dollar amount of their wages. CVS frequently offers ZayZoon users a bonus of 7% above the cash value of their EWA payout. This year, ZayZoon enhanced the use case to include generic gift cards for certain categories like gasoline, giving consumers free, instant access to their wages in areas of critical need. Birmingham, Alabama-based Immediate also offers workers the option of receiving EWA payouts through Prizeout's gift cards. A conference room at Instant Financial's office in Atlanta. Instant Financial draws investors with its wide-access payout model Since its launch in 2015, Alpharetta, Georgia-based Instant Financial has pioneered capabilities for employers to pay workers immediately for a variety of purposes through its payroll card — including EWA. Tightly integrated with employers through their payrolls, Instant offers its core Instant Pay EWA service, along with Instant Tips for restaurant workers to access tips when their shifts end and Instant Miles, to instantly reimburse employees for mileage. Instant Financial is free to end users. The company earns revenue by charging employers for its service and interchange from transactions using its Visa-branded debit Instant Card. The on-demand model is compliant with wage and labor laws in all 50 states, a company spokesperson said. To meet rising demand from companies in the restaurant industry and other industries paying gig workers, Instant Financial recently adopted the domain name Paydayrevolution.com. The company is in the midst of overhauling its Instant Card for EWA payouts and introducing new features to further streamline workers' instant-access to wages through a mobile app. As a result of these moves, Instant Financial announced last week its second funding round since 2018, led by TTV Capital, with participation from ITC Holdings and InComm. The company did not disclose the funding amount. Companies using Instant include Tampa, Florida-based Bloomin' Brands, which operates more than 1,450 restaurants worldwide with about 87,000 employees. San Diego-based Road Runner Sports, which has about 500 employees, also uses Instant Financial. After remaining above $2 trillion for a year, the Federal Reserve's overnight reverse repurchase facility has seen steadily less use in recent months. The development is welcomed by banks, but could be a sign that certain financial players are shifting funds to riskier activities.