Why PNC plugged into an early wage access marketplace

PNC Financial Services Group is working to help corporate clients retain their employees by supporting a number of payment technologies that can free up workers' cash flow.

PNC supports both early wage access (EWA) — a system for giving employees the portion of their paycheck they've already earned ahead of the traditional payday — and Request for Pay (RfP), an invoicing method tied to real-time payments. The two technologies do not connect directly, but they can intersect in useful ways, such as when a biller needs funds immediately and their customer can make that payment by getting a portion of their salary several days ahead of schedule.

"In a tight labor market employers are going to look to create more connectivity to their employees," said Chris Ward, executive vice president and head of digital and innovation for PNC's Treasury Management unit in Matthews, North Carolina. "The employees are going to want immediacy, and an interconnected experience for salary and how they can manage and spend funds."

PNC is working with New York-based DailyPay for EWA and The Clearing House's RTP rail for RfP. Through these partnerships, PNC is able to pair EWA and human resource services with its support of RfP to help consumers manage their salaries and billing; while DailyPay can try to differentiate itself among EWA providers.

PNC recently used DailyPay's marketplace to launch PNC EarnedIt, an on-demand payroll product geared toward corporate users. The product uses companies' existing payroll and time management systems to calculate net earnings, allowing employees to access available balances at all times, and choose the speed at which they want to receive the early portion of their salary. Up to 80% of an employee's salary can be made available before the traditional pay period.

PNC is one of about a half-dozen banks that offer RfP through the real-time payment rail. RfP is pitched as a way to help consumers avoid overdrafts and corporate clients manage supply chain challenges. Combined, RfP and EWA can help users manage their funds by drawing a portion of their pay when a bill is due to pay it in real time, for example.

The partnership builds on an early agreement between PNC and DailyPay to speed disbursements of early wages between the bank's treasury management clients and their employees.

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"In a battle for consumer deposits banks are going to have to get creative to get funding to people sooner," said Jason Lee, founder and CEO of DailyPay.

Friday's job report showed employment nearing pre-pandemic levels, but also revealed a near-historic level of job openings, with 11 million vacant positions, or 1.7 vacancies for each available worker. Addressing these problems through payment technology is more a purview of banks or financial institutions, according to Lee.

"Pairing EWA with instant billing is a way of communicating to consumers that they can use the bank for all manner of financial services," Lee said, adding DailyPay anticipates announcing more bank partners in the coming weeks.

The labor shortage has prompted many responses from fintechs and other companies. Lenders, for example, are pitching credit as a way to boost salaries or bonuses to attract or retain workers. EWA providers are partnering with human resources outsourcing companies or placement firms to use flexible payroll as lure employers can use to attract staff.

DailyPay is operating in a crowded market for EWA companies, including firms like Clair, Cloudpay Now, Wagestream, Square Payroll, ActivePay and Earnin. There's pressure to expand into new areas such as human resources or management tasks such as scheduling shifts, particularly as EWA providers start to pair with traditional financial institutions to add breadth to their core payroll products. Wage control has also become a core benefit for employers beyond the traditional targets such as gig workers and freelancers.

"Employees see on-demand access to wages as a benefit, and employers are looking for scalable ways to attract and retain their workforce, especially hourly and frontline workers," said Betsy Summers, principal analyst covering the future of work for Forrester Research in Los Angeles.

"Whether they are factoring in this reason or not, employers are reducing financial stress by offering this benefit, helping employees avoid overdraft fees, predatory lenders and other stopgap measures to get money off pay cycle," Summers said, adding there is some risk to EWA as fees for early access could include fees that boost the expense for consumers. PNC will determine fee structure for corporate EWA deployments through DailyPay Marketplace. DailyPay does not charge fees for direct deposits.

"What I like to see is EWA coupled with a budgeting tool and education resources, in app, to help people manage their money and financial wellness," Summers said.