According to the Financial Health Network, Earned Wage Access – also known as EWA or on-demand pay – “allows employees to safely draw some or all of their earned wages before payday.”
Payactiv invented Earned Wage Access in 2012 and our platform makes it possible for employers to offer their employees access to their earned but unpaid wages between paychecks by integrating with the HR systems they already use and making the employees’ wages available from a mobile app. Employees can access their earned wages when they need them and transfer them to their card or bank account to make payments, pick up as cash from Walmart, or use directly for Uber, Amazon, or to pay bills from the app.
EWA platforms aim to provide a meaningful solution to payday loans and overdrafts, while ultimately aiding in the reduction of employee financial stress to boost engagement, productivity, and retention.
US workers made around 56 million EWA transactions amounting to $9.5 billion in 2020
In theory, EWA products can have similar use cases as short-term liquidity products, such as small-dollar credit, helping individuals overcome problems with misaligned cash flow and providing a way to cover an emergency expense. However, despite the increasing popularity of EWA products, there is not yet enough evidence to determine their impact on employees’ financial health. (https://finhealthnetwork.org/research/know-your-borrower-the-four-need-cases-of-small-dollar-credit-consumers/) Financial Health Network research has found that most EWA product users access the product consecutively over varying periods of time, and that the employee’s cost to use the product can vary based on the company’s fee model and individual usage patterns. (https://finhealthnetwork.org/research/earned-wage-access-and-direct-to-consumer-advance-usage-trends/)
Employers offering EWA should make sure that their employees understand the service and continue to modify it based on its impact on their employees’ financial wellness. In addition to EWA, businesses should also offer a suite of financial resources to help employees’ financial literacy and health. Lastly, it is important for businesses to minimize any employee fees related to EWA.
In a survey study by Visa in 2019, it reports that 95% of workers would be interested in working at companies that provide EWA (Visa, 2019).
With 7 in 10 workers who quit a job in the last year claiming access to earned wages would make them more likely to stay, it’s clear Earned Wage Access has become a key element in employee benefits packages everywhere. (https://www.payactiv.com/resources/5-myths-around-earned-wage-benefits-and-the-real-facts/)
Employees’ access to wages are usually funded through the EWA vendor – typically through capital on their balance sheet or use of a debt facility. Vendors use a payroll integration (if they do not already manage payroll) or secure timesheet data to verify the earnings that can be accessed through a user-facing application.
Employees can receive access to their wages in one of several ways: funds are sent to an employees’ linked direct deposit account through their employer, to a bank account the employee has set up with the EWA vendor, or to a prepaid or payroll card. Most EWA companies allow users to access 50%-100% of earned wages at a given time. Rules around accesses per pay period or per month and ability to take consecutive accesses vary by provider and by employer.
Wages accessed prior to payday are typically recouped from the users’ very next paycheck, usually meaning a repayment period of less than two weeks. EWA providers have at least a 97% recoupment rate; for those who may have difficulty repaying, some offer referrals to local resources to provide support.
Accesses are sent to an employee’s external bank account via direct deposit typically the next business day. Transfers to externally linked debit or prepaid cards can take up to 48 hours. Transfers can be made instant for a $1-$5 fee, depending on the vendor. Conversely, transfers can be instant and often are free for bank accounts or cards offered by EWA vendors.
|EWA Pricing||Free with DD on PA card $1/day, +$1.99 instant *Fees capped at $3 for 1 week or $5 for 2 weeks||$1.99 / 2-3 days Transfer, $2.99 For Instant Transfer||Free with 3 days standard delivery $2.99 for EWAs under $25 $3.99-$4.99 for EWAs $26-$75||$8/mo membership fee, can be subsidized by employer|
|Access limit||Customizable by employer, up to 90% net income||up to 100%||up to 50%||up to 50%|
|Walmart cash||Yes, $1.99/ txn||No||No||Yes|
|Savings Tools||Goal-based Savings and SmartSave||Yes||No||Yes|
|Financial counseling||Free 1:1 coaching||No||No||No|
|Discount Marketplace||Rx, car insurance, gas, entertainment||No||No||No|
|In-app communications tool||Yes, customizable for announcements, chats, etc||No||Activity feed, Branch Messenger||No|
This list is not exhaustive but it highlights the four pillars of our EWA program.
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