7 banks and other firms changing payroll to battle inflation

October 12, 2022 11:31 AM

More demographic groups are demanding access to salaries in something other than a traditional two-week pay cycle, leading banks and payment firms to get more aggressive in offering alternative ways to handle payrolls.

"By providing their employees access to the money they have already earned, employees have more short-term liquidity to avoid overdrafts, late fees, and expensive payday loans," said Ram Palaniappan, CEO of Earnin, a firm that offers an earned wage access (EWA) service, which allows employers to offer a portion of employees' earnings before a regularly scheduled payday.

Along with buy now/pay later lending, EWA is a product that has gotten a boost in the past few months, as consumers turn to short-term liquidity fixes.

Consumer financial health is in decline, a trend that started during the pandemic and has accelerated amid high inflation and fears of an economic downturn.

Payments

Why PNC plugged into an early wage access marketplace

March 10, 2022 11:42 AM

Workers earning more than $100,000 per year who live paycheck to paycheck doubled between 2019 and 2020, growing from 18% to 36%, according to WTW, a workplace consultancy. WTW conducted a survey of 9,600 workers in the U.S. in December 2021 and January 2022 for a report released in June 2022, accumulating its data mostly before the recent inflation spike, which presumably would exacerbate the challenges.

Also, 53% of single parents, 52% of workers earning less than $50,000 and 57% of people in poor health live paycheck to paycheck. Someone who would not be able to pay basic monthly expenses if unemployed is considered to be living paycheck to paycheck.

"In a world where unexpected expenses have become too common, and prices are rising due to unprecedented inflation, we're hearing from clients that their employees often need or want access to their wages on an ad hoc basis," said Doug McKinley, senior vice president and head of innovation for PNC Treasury Management.

Here are some firms that have recently added flexible salary options for their employees.

Andrew Harrer/Bloomberg

Amazon

Amazon in late September expanded Anytime Pay, the e-commerce company's EWA product for employees. Anytime Pay, which was previously limited, has been made available to all U.S. workers.

The product allows staff to access up to 70% of their pay with no fee. Amazon, whose workers have made moves to unionize, expanded Anytime Pay as it hiked salaries to $19 per hour for warehouse and transportation workers and $16 for fulfillment workers. Amazon's headcount passed the one million milestone earlier in 2022, and it has employees in nearly every state.

For consumers, Amazon has also expanded its Affirm BNPL partnership to reach more markets. "EWA gives employees more opportunities for liquidity, meaning they are more able to tackle an emergency expense or afford gas so they can go to work," Palaniappan said.

PNC

PNC Financial Services Group earlier this year partnered with EWA provider DailyPay and the Clearing House's RTP instant payment system to combine EWA and Request for Pay. Request for Pay links bill presentment to instant settlement to improve the linkage between payments and a consumer's available funds. EWA adds a salary access option to a bundle of products that can address personal liquidity.

DailyPay's research found that employees save an average of $1,205 spread over 12 months in reduced overdrafts, late payment fees and fees for traditional loans, McKinley said.

PNC did not provide data on how many people have signed up for the EWA or RfP products. "The lingering effect of the Great Resignation and labor shortages, coupled with the current market environment, is certainly a driving force for interest in on-demand pay solutions," McKinley said.

David Paul Morris/Bloomberg

Visa

Visa, DailyPay and the Bancorp Bank in September launched a prepaid card that's tied to EWA and several other financial services.

Called Friday, the prepaid card offers a no-fee instant payroll transfer, and access to a mobile banking platform that allows workers to track earning and spending.

There's also a P2P feature, a locator app for no-fee ATMs and links to mobile wallets such as Apple Pay, Samsung Pay and Google Pay.Friday is also not tied to specific employers, so workers can use the product if they leave their job or join another company.

Moves Financial

Moves, a Toronto-based company which offers bank accounts for contract workers, is pushing payroll alternatives to address the expansion of contract or gig economy work models from ride sharing into other businesses. Moves partners with Blue Ridge Bank in Charlottesville, Virginia, to provide financial and payroll services for freelance workers.

In an earlier interview, Matt Spoke, CEO of Moves, said the increase of gig work also means more people have multiple sources of income. That increases the need for firms to offer wider access to wages as people become less patient about waiting to be paid.

OTG Management

OTG, which operates stores and quick service restaurants at Toronto's Pearson International airport and other locations, has partnered with payroll provider Ceridian to offer Ceridian's Dayforce Wallet EWA card.

The card is linked to Dayforce's payroll and human resources back end, providing interchange revenue to Ceridian and a means of recruitment for OTG. OTG uses the Ceridian collaboration to recruit at job fairs, and has reported a 131% increase in usage of the Dayforce Wallet among OTG workers between the summer of 2021 and 2022.

Products like EWA are often pitched as a recruiting and retention tool for employers to attract workers concerned about their personal financial health. There's also evidence that helping consumers manage financial well-being contributes to a better performance at work.

More than half, or 51%, of consumers say their company has a responsibility to offer financial wellness programs for their employees, which includes pay flexibility, according to eMoney Advisor, adding 42% of firms report increased productivity, 41% improved retention and 40% increased morale.

Citizens

Citizens Bank this past summer debuted a product that allows corporate clients to provide on-demand access to earned pay, paired with other financial wellness tools.

The product funds the earned wages, and the bank is reimbursed by employers during the traditional payroll cycle, which the bank says allows it to be used at no added cost and no impact on working capital. Citizens also launched a second feature that allows customers to receive direct deposits two days early.

The bank referenced a Visa survey of 1,000 employees which found 95% would be interested in working for a company that provides EWA; and a Citizens survey that reported 70% of middle-market treasury executives were already offering some form of early wage access.

Robin Arnfield contributed to this story.

U.S. Bank

U.S. Bank has also created a link between prepaid cards and EWA. The bank recently allowed organizations that use the prepaid U.S. Bank Focus Card for payroll disbursements to access a portion of their wages on demand through the Focus card.

The product includes other services such as instant deposit into an employee's checking account through the RTP rail. There's also access to other products such as savings accounts and bill management.

The WEA disbursement option speeds direct deposits up to two days, and the prepaid deposit option is also near-real time. The use of the RTP rail is designed to pair wage access with outgoing bills, much like PNC's offering does.