The world is moving at breakneck speed. For perspective, the last 100 years of science and technology have transformed it like never before. Now, digital transformation is disrupting every industry, cluster, and ecosystem. However, there is one area that’s been quiet for centuries, and it seems no one has turned their attention toward it.
Broken payroll, outdated pay cycle
The concept of monthly payment of salary has remained the same for centuries. The practice of a fixed, regular payment at the end of the month started supposedly in 10,000 BC during the first agricultural revolution. It still holds today! Although there have been many technological interventions around payroll calculation and disbursements, the pay cycle frequency has not changed in the last 30-50 years.
At the end of the month, the paycheck-to-paycheck system leaves the financially vulnerable with extremely limited options to prepare for the future. With little awareness and support, employees can break this vicious cycle of debt and take a step towards financial security.
Earned wage access to the rescue
EWA is a concept where employees can get rid of their everyday financial pressure, access their earned wages, and avail of funds when needed. It works wonders for employee benefits as, unlike payday loans, or personal salary loans, earned wage access involves little to no cost and is not a loan. Earned wage access platforms have the potential to eradicate predatory lenders and their inherent risks.
Also Read: How payment networks are crucial to the rising fintech movement
With the proliferation of mobile connectivity, fintech innovation, and the gig economy, the solutions provided by earned wage access platforms are creating a future where every worker has on-demand financial access that is fair and transparent. According to a report by EY, in India, 81 per cent of employees face a liquidity crunch between pay cycles and close to 60 per cent said they would consider earned wage access as a deciding factor for their next job.
Running successfully across the US and Europe
Over the last decade, earned wage access has gained mainstream attention in the US and Europe. In the US and 36 other developed countries, more than US$1 trillion of accrued salaries are stuck in the employer payroll on any given day. With payroll and benefits innovations like earned wage access, hourly and temporary workers now have access to their earned wages between the two or four-week pay cycles.
Five years ago, Uber rolled out earned wage access for its drivers. Sometime later, Lyft too introduced a similar feature in partnership with Mastercard. Two years later, to reduce worker stress and increase productivity, America’s largest payroll provider ADP started offering earned wage access as part of its benefit programs. The act was swiftly followed by Sage Group, UK’s largest payroll provider.
As momentum around earned wage access has grown globally, pioneers like DailyPay, PayActiv and Wagestream are leading the march towards faster, on-demand employee payouts. Global payment companies like PayPal, Visa and Revolut have also come forward to support their employers in enabling faster access to earned wages to the frontline workers.
Enroute Asia: Earned wage access is transforming lives
In the last 24 months, the earned wage access revolution has found strong roots across Asia too. In this region, a large number of frontline workers are desperate for faster, more flexible and inclusive financial services to meet their short-term needs. Earned wage access is proving to be a boon for millions of low to middle-income employees who are desperate to escape the vicious grip of predatory lenders and improve their financial well-being.
Also Read: GajiGesa raises US$6.6M pre-Series A to provide earned wage access to underserved workers, SMEs
In India, a mid-month cash crunch causes an acute financial crisis among marginal workers. The unbanked and underbanked working population have no choice but to turn to high-interest payday loans, which lead to debt traps. To address these pain points, the earned wage access platform Refyne has emerged as a leading solution that claims to serve over 700,000 workers. The company recently announced an US$82 million Series A led by Tiger Global.
Over in Southeast Asia, GajiGesa is reshaping how employers think about employee benefits and financial wellness. Founded in 2020 by Martyna Malinowska and former Stripe and Uber executive Vidit Agarwal, the company has firmly established itself as the market-leading financial wellness platform at the intersection of fintech and HRtech.
It leads the effort to bring financial integrity and security into every workplace across Southeast Asia. Today, the GajiGesa platform empowers over 250 employers and serves over 750,000 workers and MSMEs across Indonesia.
As the pioneer and fastest-growing earned wage access platform in the region, the company has been quick to innovate and ship additional features like bill payment, mobile top-ups, and rewards in its quest to become the holistic employee benefits solution designed to improve financial well-being. Interestingly the company counts global EWA pioneer and leader Wagestream amongst its investors.
The success of GajiGesa has also spawned several copycats too. Across the other SEA markets, smaller players like Circopay, Nano, Paywatch and others have popped up to capitalise on the growing momentum around earned wage access.
Coincidentally, two of the newer ones have also been founded by ex-Uber executives. It’s not hard to see why. Uber was ahead of the curve in redefining pay cycles for gig-economy workers, with weekly and bi-weekly payouts the norm since it was introduced in 2014.
Barely a decade on, thousands of enterprises around the world, and especially across emerging markets, are actively embracing new technologies that offer a better and more inclusive financial system that works for their employees instead of against them.
EWA has a unique opportunity to not only define the future of pay but lead the effort to accelerate financial inclusion in economies around the world too.
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