Pioneers in fintech continue to transform the financial services landscape. Their solutions give people never-before-imagined access to speed, flexibility, and transparency.
Consumers can now sign up for a checking account by phone and transact on the same day. It’s never been easier to compare deals and rates for everything from a mortgage to a personal loan.
And now, fintech is coming to employee benefits, revolutionizing financial care for workers in unprecedented ways.
A fintech niche (also known as “employer-channel fintech”) gives employers an easy, low-cost, low-friction way to offer workers financial wellness benefits, with the goal of improving their financial literacy and enhancing their overall well-being.
In this blog, we’ll explore some ways fintech solutions are bringing financial relief and support to workers.
As we move into 2024, employers need to take a closer look at the benefits most valued by the modern worker if they hope to stay competitive in a tight labor market while keeping expenses under control.
Financial wellness benefits are high on this list. Today, inflation and stagnant wages mean the financial burden on individuals and households continues to escalate. Financial stress among American workers is now at an all-time high.
Advances in digital technologies have made it possible for fintech companies to offer a wide range of tools and services that enable employers to provide better financial benefits to their workers.
By helping employees with financial challenges, employers can improve related workplace outcomes like retention, satisfaction, and productivity. Research on employee use of employer-channel fintechs confirms a positive relationship between the use of fintech products, employee financial well-being and employer outcomes.
Here are some of the fintech innovations employers are leveraging to augment their employee benefits packages with flexible financial wellness tools and support:
Fintech solutions give employers a new suite of convenient, affordable, and easy-to-access payment alternatives that employees can tailor to their personal circumstances. These options provide a financial safety net to those who need it most, such as low-income workers and those living paycheck to paycheck.
For example, on-demand pay, also known as earned wage access (EWA), allows workers to get paid when they need it so they can deal with unexpected emergencies and save and spend on their own terms. EWA is an antidote to payday loans, which often force people into a debt spiral.
The best fintech companies go a step further by embedding complimentary financial wellness resources into their solutions.
These resources are designed to help employees build financial literacy so they can better manage their finances and may include personalized advice and counseling, as well as handy budgeting and savings tools.
The Financial Health Pulse 2023 U.S. Trends Report found that a notable 17% of Americans are now considered “financially vulnerable,” representing levels not seen since before the pandemic. Such consumers generally struggle to meet their basic livelihood needs and expenses, have little to no emergency savings, and are living with burdensome debt levels. Those most likely to struggle with financial health include those from the Black and Latinx communities, young people, and women.
The same research confirms that fintechs provide meaningful support to the most financially vulnerable employees because their products are aligned with the employees’ financial needs and goals. Users of fintech solutions are more likely than non-users to report facing financial challenges, such as difficulty paying bills on time, before using fintech products. Employees participating in the study reported that they would have turned to alternative products, like payday loans if employer-sponsored financial wellness benefits were not available to them.
The scope and diversity of employer sponsored financial wellness benefits is good for employees and employers: workers who take advantage of multiple fintech features have lower turnover rates than those who don’t or who engage with them in a very limited way.
This is unsurprising given the complex nature of financial health: employees with diverse needs will benefit from multiple forms of financial assistance.
Payactiv’s own research echoes these positive findings. Before using Payactiv’s earned wage access services, 30% of employees used payday loans, and 33% used overdrafts to access money between paychecks. Upon utilizing Payactiv, those payday loan and overdraft usage plummeted by 70% and 69%, respectively. And 1 in 7 employees report improved satisfaction with their employer because of Payactiv.
As workers come to expect more from their employers and fintechs become even more sophisticated in their employer products and employer integrations, offering accessible, flexible digital financial wellness benefits will become even more important.
Payactiv is the leading provider of employer sponsored financial wellness benefits that help employees manage day-to-day finances and bills without resorting to predatory loans. Our app provides a holistic approach to financial wellness with services that help build economic resilience by saving towards short- and medium-term goals.
Learn how Payactiv can help you put your employees back in control of their finances while addressing their unique financial needs.
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