When workers can access their paychecks faster, they can often avoid payday loans, overdraft fees, and financial setbacks. That’s why Payactiv partners with more than 1,500 U.S. employers to provide workers with immediate access to their earnings via the Payactiv Visa Card. The Payactiv app also offers budgeting tools, financial education resources, and a discount marketplace for everyday consumer items.
People use payday loans but nobody ever asked why. There is a misalignment between the biweekly receipt of wages, and the multiple days in between during which bills and other expenses must be met. Bills and expenses do not wait for payday.
The approval order from the CFPB noted that the EWA program is innovative because it helps “consumers to bridge the gap between paychecks,” despite differing from the normal programs the CFPB would consider to be credit.
Helping Low-Income Workers Stay Out of Debt
A study conducted at the Harvard Kennedy School explores how innovative fintech products can disrupt this damaging cycle and benefit employees and employers alike.
Leaders can truly support their employees by trying to understand the nuances of circumstances that might be quite different from their own. Here are a few ways to let your team members know you’re listening.
The coronavirus pandemic has greatly disrupted many people’s cashflow, and made financial management much more stressful. Earned wage access is one way to provide relief to those who still have an income but find themselves financially strained.
Payactiv, Inc., the leading employer-sponsored earned wage access and holistic financial wellness platform, today announced that it has secured $100 million of funding to further its mission of bringing security, dignity and savings to workers.
Payactiv, Inc., the leading provider of employer-sponsored earned wage and tip access, today announced PaymentsSource.com published an interview with co-founder and CEO Safwan Shah. The discussion with author Michael Moeser covers Payactiv’s new pricing models called ACCESS Freedom and ACCESS Choice, and reduces fees to free and $1 per day of use, respectively. Shah also discusses the reasons for the pricing model change, why Payactiv chose to become a Certified B-Corporation and Public Benefit Corporation, and his vision for assisting struggling workers by repairing the cash flow misalignment that occurs between paychecks.
For many people, waiting for payday can cause great stress, a situation only made worse in today’s environment. Hourly workers on the frontline are among those most heavily impacted by the pandemic, including those stocking shelves, supporting logistics, running our pharmacies, making deliveries and providing other essential services. According to Payactiv data, because of the COVID-19 crisis, 82% of hourly workers are now saying that loss of income is their greatest concern. Even prior to the pandemic, 44% of Americans had less than $500 in savings.
What if hourly workers could access their already-earned wages in between the regular pay cycle, giving them greater financial flexibility and peace of mind? This is known as Earned Wage Access (EWA).
Typically, payday loans charge $15 for every $100 borrowed. Bank overdraft fees often cost about $35. In contrast, Payactiv charges $5 per pay period when an employee uses the service, which also includes financial counseling and online bill payments.
Payactiv is a particularly interesting innovation. Marketing itself as a “financial wellness solution,” it plugs into employers’ time-and-attendance systems and allows employees to withdraw up to $500 of their earnings before payday, for a fee of $5 per pay period. These aren’t one-time withdrawals: You get an unlimited number of transactions, including cash withdrawals, Uber rides and debit-card payments, for the one-time fee.
If you labor in lower-income positions, including part-time “gig” jobs, the trend is toward getting pay into the hands of workers faster — often within a day or two of completing a shift. “As a society, we want everything — food, movies or whatever — in real time, so why can’t payroll be on demand, too?” asked Ijaz Anwar, chief operating officer at Payactiv.
Workers’ financial health is no longer an HR issue; currently, it now affects a company’s bottom line. Not surprisingly, employee demand for EIA at workplace is high even in absence of any employer promotion. This is a no-brainer — when an EIA program only costs $5, who would pay $45 for a $250 payday loan or $35 for a bank overdraft?
Head of human resources at Jenny Craig Australia and New Zealand Joshua Nunan said financial insecurity was a “real issue” for many Aussies, and a number of staff members had already used Payactiv since Jenny Craig signed up several months ago.
Employees can use a smartphone app to download their money onto a Visa debit or preloaded card, or even a traditional credit card. That also helps workers who do not have access to a traditional checking account.
“Our ability and agility to seamlessly integrate into businesses pre-existing systems allows for an execution” that banks are unable to accomplish, Ijaz Anwar, Payactiv’s co-founder and chief operating officer. Payactiv has also partnered with community banks and credit unions to offer wage advances to financial institution’s employees.
Need cash now but you don’t get paid until Friday?
“I have bills to pay, things to buy for my kids at home, and not having enough money to accomplish what I need to do is very stressful,” said Payactiv user, Pearl Campos. When she needs money, she’s able to tap into a service offered by her employer.
Payactiv – a new app – offers an alternative to predatory payday loans. Yahoo Finance’s Dion Rabouin and David Pogue talked with the company’s CEO, Safwan Shah.
Think about that for a minute. According to the Federal Reserve, 40 percent of Americans don’t have $400 in savings to fix their water heater or some other emergency. But Shah says they’re spending around $2,000 a year on fees and interest to get emergency short-term cash. He thought this was a problem that needed fixing.
More than a hundred companies have now signed up with Payactiv. A Walmart executive says there’s been an “extraordinary” response from employees. More than 200,000 Walmart workers are now using the system.
Listen to this NPR All Things Considered story
Last week, Payactiv announced its service will now be available to more than 600,000 employers that work with payroll giant ADP.
Shah said his deals with ADP and Employee Loan Solutions’ tie-up with Brightside show there’s growing acceptance among employers that the best way to help financially stressed employees is not to lecture them about budgeting or savings but to offer them services that solve immediate problems.
“If somebody is hungry, do you give them a diet book or a meal?” he said. “At some point, you have to do something real.”
More than 50 million Americans in low-income working families struggle to manage everyday cash flow. “… Walmart, one of the largest employers of low-wage workers, recently made Payactiv available to its employees. From December to March, 80,000 Walmart employees received more than $30 million through Payactiv.” – Todd Baker and Snigdha Kumar.
The world’s biggest retailer has unveiled financial-planning tools designed by Silicon Valley-based Payactiv Inc. and Even Responsible Finance Inc., a move that lets its employees access earned wages ahead of scheduled paychecks and avoid bounced checks or payday lenders.
Payactiv representatives help set up savings accounts, demonstrating how saving just a few minutes’ worth of wages over time becomes a way to pay debts or family expenses. They also guide users to credit counselors for one-on-one advice.
If these fintech products were widely available, they could benefit virtually all of the nation’s 10.4 million low-income working families and, indirectly, the 47 million individual members of those families.
One way to help address the financial wellness of lower-income Americans is to help steer them away from resources that end up hurting their financial condition in the long run. The company Payactiv offers a market-based workaround to this issue by collaborating with employers to provide an innovative benefit.
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“I was thrilled to see this program (Payactiv) and delighted to bring it to the staff. Right now, about one-third of our staff are using the program. It consists of an app that can draw from your account, or it can be used at a special ATM that is accessible to everyone on campus.”
“Payactiv helps low income employees, people making $25 and less. We let employees access their earned but unpaid wages when they get into financial emergencies, helping them avoid payday loans, and a variety of other fees and penalties.”
“Many workers are reluctant to ask for an advance,” says Ulislam. “So by the time they request one, they may be in real trouble. They need the money yesterday, not in four or five days.”
“This is neither a loan nor an advance. It’s already earned. It’s just a technology solution. We change the frequency or velocity of money,” said Safwan Shah, founder and CEO of Payactiv.
Listen to this NPR Marketplace story
Goodwill is using technology from Payactiv, a start-up in San Jose, Calif., that uses employers’ wage and hours information to estimate their employees’ earnings. For a fee of $5 per transaction — of which Goodwill pays half as a courtesy to its workers — Payactiv advances the cash. On payday, it recoups the money directly from the employer.
Payactiv’s founder, Safwan Shah, talks with a missionary zeal about the potential impact. “The biggest bank in this country is the bank of the employer, and two to three weeks of salary for most people is stuck there,” he said. “This is a corporate responsibility issue.”
New financial technology lets employees draw on a portion of their salary as they earn it. “Is waiting to get paid something that can create forced savings, or does it cause problems for low-income people? We’ve done studies to prove that what we are doing is actually helping people save more.”
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What I found intriguing is that Payactiv would increase the velocity of money in our economy. In Shah’s model, the world’s largest bank resides within corporations, where money that has been earned but not paid out is stored; he estimates that over $100 billion per week is frozen in the U.S. alone.
Silicon Valley’s Payactiv promises to be an alternative to “short term, short dollar, predatory lending products” used by 90 million underserved and working poor in the United States.
Payactiv disrupts the destructive cycle of payday loans by giving workers access to wages they have already earned but have not yet been paid. The firm also offers a simple mechanism for savings and very comprehensive end-to-end tech.
“I can find 10 solutions to borrow $1,000, $10,000, $5,000 but I can’t find a single good solution in our entire financial eco-system for someone who needs a $100 or $200.”
The dissonance between what you have earned and when it is delivered is painful for employees, and built on an antiquated system — the slow and expensive paycheck. Payactiv users can get the money in their accounts in realtime.
Traditional financial wellness programs that focus mostly on education or retirement planning did nothing to help workers in dire straits, according to hospital Chief Financial Officer Kendall Johnson. So the hospital turned to a unique solution [Payactiv]: allowing employees to take out small advances on their paychecks.
While credit unions, by their very charter, are committed to serving the financial needs of their member communities, a hard reality is that often, the community that is perhaps most important to the health of the credit union itself – its employees – is struggling with achieving financial wellness.
Improving Pay Day Timing
Who among us would have imagined that in 2016, virtually every aspect of our personal and business lives is “on-demand” and in “real-time?” Today, we access what we want, customized to our needs, now. To wait is passé, costly even. Instead, aligning time to our needs brings efficiency, transparency and savings.
Because the value of the knowledge worker, the value of our understanding of what drives human productivity, all of that is increasing with better studies and data. All of that knowledge is coming into software and technology.
Payactiv’s disruptive business model and industry-leading HR technology are the foundation for a powerful financial wellness program that makes a measurable difference in society.
At a time when the industry is moving toward faster payments, a handful of entrepreneurs are looking to narrow the gap between an honest day’s work and an honest day’s pay.
They [Payactiv] are addressing a problem that for years, decades really, many of us have assumed there are no solutions for. We have accepted them as “the way things work” and never really thought about what could be different. This is an innovative solution to a problem that we have all just accepted.