EarnIn adds B2B option as consumer groups attack EWA

• Key insights: Earned wage access provider EarnIn is expanding into B2B payroll but will still offer direct-to-consumer EWA. 
• What's at stake: The expansion comes as consumer advocate groups step up efforts for stricter controls over the industry. 
• Forward look: Mores states are expected to pass EWA legislation next year. 

Earned wage access provider EarnIn is expanding its direct-to-consumer offering into business-to-business payroll. The shift comes at a time when the broader EWA industry is facing renewed criticism from consumer advocate groups. 

EarnIn launched EarnIn Payroll, which allows employers to integrate EarnIn's products into their payroll. EarnIn offers Early Pay, which allows consumers to get their paycheck two days early; Live Pay, a finance product that "streams" consumers' earned wages using constructs typically found with secured credit cards; and Cash Out, its traditional EWA product with free ACH transfers and fee-based real-time transfers. It also offers other financial wellness tools, such as low-balance alerts, a savings account and credit score monitoring. 

The fintech works with at least 10 payroll providers, including AccuPay, PayDay and California Payroll, according to its website. The company has increased its reach to more than 12,000 employers across the U.S, and estimates it processes about 1% of U.S. paychecks. 

"You work every day, you shouldn't have to wait two weeks to get paid. Paychecks are digital today, and they should work like other digital products," Ram Palaniappan, founder and CEO of EarnIn, told American Banker in an email. "Imagine if your phone said 'type in your messages every day and that it would send it out every two weeks.' You wouldn't use that. But that's exactly how payroll systems have worked, until now. EarnIn Payroll changes that."  

EWA's growth

EWA offerings are becoming more prevalent within larger financial wellness tools and often used by employers as a benefit to increase employee retention. Neobank Chime, which has its own on-demand pay product, in August signed a distribution deal with human resources and financial management platform Workday to offer Chime Workplace, its suite of financial wellness products, to employers on Workday's platform. 

On-demand pay is "the highest used benefit in the history of benefits," Fred Choquette, COO of employer-integrated EWA provider Rain, told American Banker. Rain works with employers with as little as five employees and as many as 300,000 employees, including Marriot, McDonalds and Hilton. 

"We've got upwards of 60% of people signing up, and they're checking the app almost all the time, even if they're not transacting every month, they're looking at it," Choquette said. 

EarnIn's venture into B2B payroll allows it to expand its distribution channel to the small businesses on payroll providers' platforms and their employees at a greater scale than the direct-to-consumer model. 

Employer-integrated EWA models are also hailed by proponents as being more accurate than direct-to-consumer models because fintechs have direct access to time and attendance, which eliminates guesswork. Payment is also deducted directly from payroll, rather than from the consumers' bank account, which reduces the chance of overdraft fees, a common criticism of direct-to-consumer EWA. 

"Direct-to-consumer and employer-integrated [models] serve two very different needs," Choquette said. "Employer integrated, we're giving you access in real time as you earn it every single day. Sometimes, on some of these systems, it's even hourly. In the direct to consumer world … you've got KYC, so it's not 100% approval. Then you have credit limits. So most employees only qualify for $100." 

Pushback from consumer groups

But on-demand pay is far from being widely accepted and has seen a resurgence of criticism from consumer advocate groups following lawsuits brought by the City of Baltimore, New York Attorney General Letticia James and District of Columbia Attorney General Brian Schwalb for deceptive marketing and illegal interest rates.  

At the center of the debate is whether EWA should be considered a loan. Consumer advocates maintain that EWA should be considered a loan, while industry has argued that wage advances are nonrecourse, and should not be held to the same lending standards. 

The Center for Responsible Lending on Oct. 16 released a policy report that called on state lawmakers to remove EWA exemptions from credit laws, hold fees to rate caps where they exist, impose rate caps in states where they don't exist and require robust data reporting and transparency so consumers can't use EWA services from multiple providers. 

"App-based payday lenders have co-opted the language of financial inclusion in an effort to disguise the ancient grift of exploiting underpaid workers with usurious loans," said Monica Burks, policy counsel at CRL, in a statement. "These companies promote a legal fiction that their loans are not loans, pretend the standard measurement for interest rates doesn't reflect their loans' costs, and push borrowers to pay fees deceptively called 'tips.'"

That report spurred public rebuke from the American Fintech Council, a fintech industry organization that has been lobbying state lawmakers this year to pass earned wage access regulation. Six states added new EWA regulations this year, doubling the total number of states with EWA laws. 

AFC sent a letter to CRL and the National Consumer Law Center, admonishing the two organizations for what it called "flawed methodology and conclusions of their recently released report on EWA products," including deficiencies in the report's data sampling, analytical approach and policy recommendations. 

"This kind of research — built on biased samples, faulty assumptions, and ideological framing — doesn't move the conversation forward. It risks misleading policymakers and hurting the very communities we all aim to serve," said Ian P. Moloney, SVP and head of policy and regulatory affairs at AFC, in a statement. "We call on CRL and NCLC to engage constructively with industry leaders and regulators in developing fair, modern rules that recognize responsible innovation can be a force for good."

The CRL has defended its research. 

"CRL's research relies on anonymized bank account transaction data from thousands of consumers. The numbers do not lie. A larger data set is readily available from AFC and its members, who presumably would make such data available if it supported their claims. They have repeatedly refused to do so," Ellen Harnick, executive vice president and director of state policy at the Center for Responsible Lending, told American Banker. "If AFC and its members do not rely on borrowers who take multiple loans per month, it is difficult to understand their opposition to limiting the fees that borrowers end up paying for repeat use." 

The NCLC also supported the report's findings. "The Center for Responsible Lending does solid research, and their finding that earned wage payday loans create an increasing debt trap over time is exactly what you would expect from a form of payday loan," NCLC Associate Director Lauren Saunders told American Banker.