Earned Wage Access (EWA) service providers are increasingly in demand around the world thanks to the new work lifestyles that most workers demand today. While large enterprises would likely rely on EWA’s services, it is small and medium-sized enterprises (SMEs) that would rely heavily on it.
Before the pandemic, most SMEs paid their employees monthly, whether part-time or full-time, based on the work performed. Some companies would offer payments by bank transfer while others would pay their staff in cash or by cheque. But the pandemic quickly changed most of these processes in place.
With the increasing digitization of services, the use of cash and checks became less important, and businesses quickly relied solely on banking services to pay their employees. Although these services were secure and could be automated, there remained a funding issue for those who needed access to earned wages.
In response to payday loans, EWA’s fintech products allow employees to access a portion of their salary anytime before payday. Currently, the global payday loan market is expected to reach $46.68 billion by 2030.
Thus, EWA solutions now allow companies, especially SMEs, to offer their employees access to financing in complete security, without compromising their careers or their finances.
With Access to Earned Wages, employers no longer need to go through the tedious processes of accessing wages for employees who are due to receive their net pay before their regular pay date. Salaries can be deducted from their total income and conveniently made available to them through the EWA.
One of the largest EWA services in the world is offered by Revolut. For example, digital banking’s on-demand payment has been adopted by small businesses in the United States and Europe. In Southeast Asia, several startups have also started offering EWA services, with most of them recently securing funding to improve their services and expand their offerings.
Simplify access to earned wages
One such company is Paywatch. The earned wage access startup that operates in South Korea recently raised $5.3 million in seed funding which it plans to use to expand into new markets in the region, Singapore, Indonesia , with Malaysia and the Philippines being key markets.
In a conversation with Tech Wire Asia, Alex Kim, co-founder and president of Paywatch, said that while other EWA providers are struggling to solve cash flow issues for SMBs when it comes to to advance salaries and the like, Paywatch focuses on equal opportunity for funding for employees, regardless of their financial capabilities.
“The problem with banks when it comes to financial access is that high-income people can get access to low-interest loans, but low-income people get high interest. It is an unfair part of society. What we have decided to do is to work with the banks to create a system to reduce the rate of default due to job cuts. And it’s done through a payroll deduction system,” Kim commented.
Compared to other solutions for accessing earned wages, Kim pointed out that Paywatch wanted to have a program that allowed its users to access major banks and use data from the platform to not only have access to EWA, but also to other available products. This includes access to mortgage products, car financing, etc.
“EWA is the product we launched with our banking partners. But we are quickly becoming a benefits platform. We work with insurance companies, e-commerce sites as well as savings and deposit products. We want to be like an HR solutions provider that offers a range of employee benefits. All regulatory and compliance issues are also resolved by our partners,” added Kim.
That said, Kim also pointed out that in Malaysia, Paywatch has been recognized by the United Nations Capital Development Fund, Bank Negara Malaysia and MDEC for its financial inclusion initiatives.
For Kim, it is a zero rate product from Paywatch. They are not a loan company. They simply aim to access the salary for which they have already worked. This is the main differentiator for Paywatch compared to other EWA providers.
“We also see some players in the United States following this model. It’s not an easy journey. We have to work with partners. Platforms in the United States were the first to launch this. But we notice that some platforms are working with big banks to have products similar to ours,” Kim added.
As regulators crack down on EWAs that charge predatory rates, Kim also thinks the industry is going to get a lot more exciting in the years to come. As Kim says, ultimately, Paywatch is about making funding easily available to employees when they need it, and when they do it the right way.