Earned wage access (EWA), while still relatively new, is making its way into the mainstream market quickly.
Post-Covid payment systems continue to innovate at full tilt and workers’ expectations are changing within the fast-growing gig business. Americans are in various stages of pandemic recovery and are now trying to survive the recent surge in inflation. To avoid tapping rainy day funds, employees are looking for flexibility when it comes to pay structure – to close the gap between paychecks and quickly get the money they need to get a grip on their expenses.
A vast majority of working Americans want to be paid on-demand and for this reason, many financial institutions are now supporting on-demand pay plans to offer a free or low-cost benefit for business customers.
Financial institutions like Citizens Financial, PNC, and U.S. Bank are among the early adopters of on-demand pay. Citizens Financial, and PNC, including TD Bank leverage DailyPay, an EWA provider, to offer EWA solutions to their clients. Santander Bank has followed suit and tapped DailyPay to incorporate the new EWA offering into its treasury management in a move to benefit its commercial banking clients in the US.
Through DailyPay, Santander’s commercial banking clients can allow their employees to have immediate access to their pay as they earn it at any point in the payroll process. A user’s earned pay can be transferred to their preferred account, from where they can withdraw their money before a biweekly pay cycle or specific payday.
How does the Earned Wage Access offering work?
EWA programs are employer-enabled services that operate through a partnership between a provider and the employer. The offering lets an employee opt-in to accessing payroll information, which helps determine their actual earned wages. At the end of a shift or hour/day, the employee can use the provider’s mobile app to access an allowed percentage of their income for that period. Costs for the service are backed by the employer as part of their employment benefits package. Most often, this results in free or lower-cost access for the employee to withdraw their earned pay. On payday, the provider collects funds directly from the employer for any earned wages disbursed prior to the payday. The employee is still eligible for a periodic paycheck from their employer on payday including the adjusted difference of any wages already paid. Responsible access to already earned income through an employer’s partnership with an EWA provider gives the possibility of loans or debt traps a wide berth.
What’s in it for banks?
The EWA offering can serve as an impactful tool for bank clients, bolstering the bond between the employee and the employer as well as establishing a sound footing for their businesses. In turn, it deepens the relationship clients have with their banks and reinforces the growth that they can achieve together.
“DailyPay’s solution has several key components that enable our clients’ workforce to not only control how and when they get paid, but also provide them the opportunity to save, earn rewards, and process off-cycle payments,” said Greg Murray, managing director, head of payables and receivables product management, Santander commercial banking.
Ensuring payment accuracy and timely disbursements are critical parts of job satisfaction and employee retention. According to recent research, the average turnover rate improved by 35% for workers who had earned wage access solutions like DailyPay. Additionally, offering flexibility into when and how employees are paid is a key differentiator among employers and a competitive advantage during a tight labor market.
Amidst the economic uncertainty, people want to feel financially secure and not worry about their next paycheck. Earned wage access can provide workers with a sense of security by giving them more control over their finances. Moreover, employees find this model more viable when it comes to managing finances without having to pivot to high-interest loans. 95% of those who were previously dependent on payday loans either stopped taking out a loan (81%) or decreased frequency (15%) after using DailyPay.
“We’re looking to bring earned wage access everywhere. Whether inflation is high or low – America’s top employers and institutions recognize the positive impact on-demand pay can have, empowering their employees and customers to pay bills, spend, save, or invest according to their own schedule, and not on an arbitrary payday,” said Rob Nardelli, director of commercial banking and business development at DailyPay.