On the podcast and on our site, we’ve explored the world of employment data that’s opening up — it’s opening up to allow new forms of lending and financial services that use employment data as a major input. So, imagine a lender wanting to loan money to an Uber driver who doesn’t have a traditional income source.
But what if the payroll firm didn’t supply just data to third parties? What if the payroll provider got into fintech itself? That’s exactly what Ceridian is doing with its Dayforce Wallet. The company processes $300 billion yearly in paychecks and it’s helping its clients and their employees tap into their salaries earlier and more frequently than the traditional pay cycle.
Seth Ross is the new GM of Dayforce Wallet and Consumer Services at Ceridian. I first met Seth when he was at Green Dot, heading up the firm’s banking as a service platform. He joins me on the podcast to talk about Ceridian’s move into financial services and more broadly, to chat about the potential of embedded financial services.
Seth Ross is my guest today on the Tearsheet Podcast.
My name is Seth Ross. I am General Manager of Wallet and Consumer Services at Ceridian. Ceridian is a global human capital management software business — we do HR software and payroll for about 5000 clients around the world. And my job is to help build the business that we have created to deliver services to the employees of those companies. And the first product that we came out with was a product called Dayforce Wallet, which is a way for employees to get access to their earnings anytime on demand. It’s a really exciting product and growing like crazy.
On average, our clients have about 1000 employees — kind of the higher end of the market and moving up. Our bread and butter has been that mid market. But we’ve been growing our average customer size consistently over the last several years and have won some very large accounts recently.
We’ve got a really broad range of clients in a lot of different industries. I can speak to Dayforce Wallet: we have particular strengths in retail, manufacturing, and in healthcare — those are segments with often large populations of workers, many of whom may be hourly workers. And so, those tend to be a segments that our solution really resonates well with.
Payroll and financial services
I’ve been an advocate for embedded financial services for a long time. I think the leadership and really our CEO, David, also identified that we had a real opportunity here. As a payroll provider, we provide a critical interface between the employer and the employee. We move over $300 billion of funds every year, just as a payroll provider. And so the opportunity to establish relationships directly with the over 4 million employees of the companies that we work with presented a really unique opportunity to make work life better. Ceridian’s motto is to make work life better. And I think there’s a real opportunity, as embedded financial services develop, that being at the source of funds, having integrations with the employer, and having direct connection to the employee to do things for these employees to make their lives better. Dayforce Wallet enables people to get their pay when they need it, on demand.
Early wage access as wedge
The philosophy is that this is our initial product. Like any great fintech, what you need to do is have your wedge product, the thing that you’re going to do better than anybody else, that’s going to earn people’s trust. We have this unique opportunity because of our architecture that we’re able to provide pay on demand, which is honestly a killer app for people.
You think about the way many neobanks built huge businesses on getting paid two days early. Well, we’re building a neobank around getting your pay anytime you want it. Forget two days early, it’s literally any time. That’s just a tremendous foundational value proposition to start from, and then you build that trust with those users, with those people, and you show them that you have their backs. You show them that you are creating solutions that make their lives better. I think that gives you the license, the trust, to do more for them. Fundamentally, banking and financial services are about trust. And the companies that succeed will be the companies that really nurture that trust and honor the trust that those users place in them.
How getting paid early works
Dayforce Wallet is offered through employers. And employers have the ability to configure the way the Dayforce Wallet is offered to their employees. So if they wanted, they could set a parameter around what percentage of pay they want their employees to have, or how many requests they want to make per pay period or per time period. That is all customizable for the employers, as well.
Go to market
It is B2B2C. There’s a significant amount of education that we provide to our direct clients. We provide a toolkit of how to talk about this type of solution with your employees and how to best get the word out to your employees. So we do a lot of work around that. We’ve recently created some customized videos for clients to use to communicate. But, we found that employees really appreciate and like this benefit that companies offer them. And so, we’ve got a lot of companies with really strong adoption for this type of service.
If you think about it, with every single one of our customers, we have the opportunity for them to be a direct deposit customer. In my old job, I was constantly dreaming and thinking up: how do I get this user to become a direct deposit customer? Well, for us at Ceridian, you can tap a button and you can have your entire pay put onto this card, because we run that payroll. And so that’s a really privileged position and it is really exciting. Frankly, that was one of the reasons why I came to Ceridian nine months ago, having been in the banking as a service and embedded finance space.
I used to be at one of the pioneers in the banking as a service business, and I got to know the things that really make an embedded financial services solution really work. One of the things that I learned was if you can be close to the source of funds, or you can get a user to make it a primary destination for their earnings, then that’s the Holy Grail. We have that in spades given that we’re already moving over $300 billion a year in payroll funds for our clients. And then on top of that, add our channel for acquiring customers — you’re looking at neobanks today that are spending hundreds of dollars to try to acquire customers. Well, we’re able to do that through privileged channels directly through employers, without the trench warfare of online advertising to try to acquire customers one at a time. It’s really a compelling model for us.
Banking as a service
I think we are in the early innings of embedded finance. There’s actually a great article by Alex Johnson at Cornerstone. He talks about what we went through in banking as a service as sort of the atomization of financial services and breaking financial services down into their individual pieces. And then the reconstituting of financial services in new clusters and new kind of centers of gravity — that’s how he puts it. I think you’re seeing that there are different types of companies that are becoming centers of gravity for financial services.
And the three that Alex talks about in his article: one is merchants. So where you spend your money. The second is communities. So when you’re working with other people, or connecting with other people, and you want to trade goods or services, or send money back and forth — online communities like Facebook. And then the third, and the one that I think is really compelling, is employers, because that’s the source of your money. And if you can embed financial services there, it’s really powerful.
I’ll just give you an example of a future vision of what we are looking at here at Ceridian. Because we’re a fully integrated solution for human capital management for our clients, that means we do everything from time and attendance for workers, to payroll, to benefits to tax calculations. You can envision a world where a user on Dayforce Wallet is earning their money into this account and spending with this account. We’ve layered on a level of intelligence into that experience to say, ‘Hey, you know, you’ve got your car payment coming up in three days, but you’re gonna run short. But by the way, there’s an open shift at your job tomorrow night, that if you take it, you’ll cover yourself.’
So the idea of being able to be proactive and to do things for that user that others just can’t do. That’s where this world is going. There are a host of different kinds of solutions that are going to change how people think about financial services. It’s not an end in and of itself. Nobody thinks to themselves, well, I’m really excited about my bank account. What they’re excited about is what it helps them achieve. I think that’s really where we’re going: how do we allow financial services to help people achieve their goals and live the lives that they really want?
Connecting with end users
There’s a broader trend of the consumerization of work. The best example I always think about is, like back when business travel was a thing. If you think about the user experience when you were trying to book business travel through one of the business travel portals that you had to use, maybe through your corporation. I don’t know if you had this experience, but I certainly have, versus what your experience was when you wanted to book your leisure travel, using a consumer centric site. What’s happening is that people are realizing that the user experience in typical B2B software has been terrible. And what we’re doing at Ceridian is really putting the user first and building beautiful, seamless user experiences for these end users that they actually do build trust with.
Because ultimately, the new currency of trust is actually user experience. And so if you can make your products work really seamlessly and work the way people expect them to work, then you will build that trust and that brand. We’ve been really focused on creating, even before Wallet, user experiences for those end users that helped build that trust. We’ve got the Dayforce mobile app separate from the Dayforce Wallet app — the Dayforce mobile app is a hugely popular solution for people to engage with their HR software that their company provides. I think we do have a brand, particularly around Dayforce, that we’re engaging with end users and building that level of trust.
I think near term key focus is going to be around rounding out the product and really building out the trust for those users to use the product as their primary bank account. That means things like savings solutions — that’s a very common request that we get. We’re implementing a rewards program on the products where you can get cash back around certain merchants — merchant funding rewards.
To make the product more appealing longer term, we are growing internationally. We’ve already launched in Canada. So we’re in two markets. We’re looking to launch in more markets next year — more to come there. We’re really excited about this concept we call ‘streaming pay’. You might use Netflix to stream your entertainment, so why not stream your wages? It goes from taking the next step from pay on demand with users taking an action to get paid to having your pay always be on. You can set your configuration and always have it flow into your bank account. We’ll give the user the kind of flexibility to say, ‘Well, maybe I want to stream it all the time every day, or maybe when I hit a certain balance, I want to pull funds forward.’ We are giving more control and more tools into the hands of those users.
The next step is further integrating with our core HR capabilities and really making a reality that opportunity to deliver more earning opportunities both inside your company, and then maybe even outside your existing company into a whole range of companies that are on the Dayforce platform that may have work available for users. We’ve already onboarded and verified users’ right to work and their ability to work. So we can actually facilitate a much larger network of workers and opportunities to be had.