Earned Wage Access (EWA) service providers are becoming more and more in demand around the world thanks to the new work environments that most workers are demanding today. While large companies would likely rely on EWA services, small and medium-sized enterprises (SMEs) would be the ones that would be heavily dependent on it.
Before the pandemic, most SMEs paid their part-time or full-time employees monthly based on the work performed. Some companies would offer payments via bank transfer, while others would pay their employees in cash or by check. But the pandemic soon changed most of those processes on the spot.
As services became more digitized, the use of cash and checks became less important and companies soon relied solely on banking services to pay their employees. Although these services were secure and could be automated, there was still the issue of funding for those who needed access to earned wages.
In response to payday loans, EWA 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.
As such, EWA solutions enable companies, particularly SMEs, to provide their employees with secure access to finance without jeopardizing their careers or finances.
With access to earned wages, employers no longer have to go through the lengthy processes to grant access to wages to employees who need to receive their net wages before their regular payout date. The salary can be deducted from their total earnings and made available to them conveniently via EWA.
One of the world’s largest EWA services is provided by Revolut. For example, the digital bank’s on-demand pay has been adopted by small businesses in the US and Europe. In Southeast Asia, there are several startups that 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 of these companies is Paywatch. Operating in South Korea with access to earned wages, the start-up recently raised $5.3 million in seed funding which it plans to use to expand into new markets in the region, with Singapore, Indonesia, Malaysia and the Philippines being key markets .
Speaking to Tech Wire Asia, Paywatch co-founder and president Alex Kim explained that Paywatch is focused on providing equal opportunities while other EWA providers are working to solve the cash flow problems for SMEs when it comes to payroll advances and the like finances for employees, regardless of their financial means.
“The problem with banks when it comes to accessing finance is that high-income people can access credit at low interest rates, but low-income people get high interest rates. It’s an unfair part of society. We decided to work with the banks to create a system to reduce the attrition rate through staff cuts. And this is done via a payroll system,” commented Kim.
Compared to other solutions for accessing earned wages, Kim pointed out that Paywatch wanted a program that would allow their users to access major banks and use the data on the platform to not only access EWA, but also to other available products. This includes access to mortgage products, vehicle financing and the like.
“EWA was the product that we launched with our banking partners. But we are fast becoming an employee benefits platform. We work with insurance companies, e-commerce sites, and savings and deposit products. We want to be like an HR solution provider that offers a range of employee benefits. All regulatory and compliance issues are also handled by our partners,” added Kim.
With that in mind, Kim also highlighted that Paywatch Malaysia has been recognized by the UN Capital Development Fund, Bank Negara Malaysia and MDEC for its financial inclusion initiatives.
For Kim, this is an interest-free product from Paywatch. You are not a credit company. They aim to easily gain access to the salary they have already worked for. This is the biggest differentiating factor for Paywatch compared to other EWA providers.
“We also see some players in the US following this model. It’s not an easy journey. We have to work with partners. Platforms in the US were the first to start doing this. But we’re finding that some platforms are partnering with big banks to offer similar products to ours,” Kim added.
As regulators crack down on EWAs charging martial rates, Kim also believes the industry will become much more exciting in the years to come. As Kim puts it, Paywatch ultimately aims to make funding easily accessible to employees when they need it, and they’re doing it the right way.