A fairly new yet ground-breaking fintech offering, Earned Wage Access (EWA) is a financial technology that allows employees to access a portion of their earned wages before their regular pay cycle. EWA is beneficial for employees who need access to their earned wages in real-time – an ever-more common situation in an environment marked by persistent cost-of-living increases.
EWA is bridging the gap between traditional monthly pay cycles and the real-time consumer behaviour that people have become accustomed to in recent years, as Deon Nobrega, Chief Executive Officer of South African EWA provider Paymenow, explains.
“With the rise of on-demand services, people expect to be able to access the goods and services they pay for immediately. We buy electricity and it’s instantly activated. We recharge our data and we’re streaming within seconds. We buy groceries and have them delivered to our door in under 60 minutes. However, with many employees still typically receiving their salary monthly, this leads to a disconnect between how people spend their money and how they receive it.”
EWA helps to address this disconnect by empowering people to move away from predatory payday lenders and expensive short-term loans. It also promotes financial inclusion and economic empowerment, particularly for lower-income earners.
One of the many benefits of EWA occurs at the meeting point between financial and HR innovation, and is an example of technology being used to improve inefficient legacy processes. An effective EWA system removes both human resource burdens as well as emotional subjectivity with respect to salary advances by using technology to automate the process.
The EWA space is still relatively young, particularly in emerging markets, and therefore requires a focus on educating both employers and employees about the benefits of this technology. Employers may not understand the need for EWA if they’re disconnected from the day-to-day stresses of their employees, and employees may be sceptical of its benefits.
By using data aggregation and behavioural analytics, Paymenow has been able to educate both employers and employees about the positive impact of EWA. Paymenow’s research and analytics have demonstrated that EWA mitigates stress arising from monthly cash-flow issues, encourages responsible financial behaviour including saving, and enhances financial literacy.
As a result, the demand for EWA solutions is increasing rapidly. Forbes quotes a study showing that American workers increasingly “have trouble making ends meet in between paychecks (51% in 2022 vs. 24% in 2018) and would prefer to receive their wages on the same day they work (79% in 2022 vs. 49% in 2018).”
In JP Morgan’s Financial Inclusion Through Payments report, the financial services company describes the results of a survey of 5 000 consumers across the UK, France, Germany, Spain and the US. Respondents described tightening budgets, with nearly half of Europeans reporting their bills were rising more quickly than their income, and a similar number reporting that this negatively affected their wellbeing. A third of all respondents said that they were forced to dip into savings to support discretionary spending.
Bryan Habana, Paymenow’s Chief Commercial Officer, says “With the rising cost of living, the benefits of EWA to employees are increasing, and so too is the sense that employers providing access to EWA genuinely value their employees. It’s a compelling example of innovative technology being deployed for societal, business and individual benefit.”
While there are undoubtedly massive benefits to implementing EWA in businesses, trends have started emerging creating a fragmented EWA market. “We have seen different EWA providers struggling to stand on their own and forming partnerships with other HR and financial service providers, and this is often not always in the best interest of the employee,” says Habana.
“As a pioneer in the EWA space in Sub-Saharan Africa, we believe in a focused EWA service that remains agnostic to the greater financial ecosystem and empower users to benefit from the best service offerings available to them. The bottom line is that EWA is financial technology creating an evolution in the HR space. Times are tough and businesses need to start relooking at how they can make their employees feel valued. EWA is a solution that helps to attract and retain talent and truly enhances the employee’s financial situation and stretching the little that they earn, that much further.” concludes Nobrega.
