How real-time payments are shaking up the payroll space

Hear how real-time payments are quickly becoming the payment method of the future and are shaking up the payroll space. Learn the benefits of real-time payments for financial institutions, such as meeting customer expectations regarding payment speed, having access to more efficient automation, and offering a more modern payment rail. Hear the latest on earned wage access, a growing use case for real-time payments.

Transcript:

John Adams (00:09):

Okay. Welcome back everybody. I'm John Adams from American Banker. In this session, we're going to be discussing real-time payments and payroll. We have a great panel with us here today. I thought we would start by, if we went down the line, everybody introduce yourselves and describe your job and your duties and a bit about your company.

Rob Nardelli (00:33):

Thank you, John. My name is Rob Nardelli. I'm the Director of Commercial banking at Daily Pay, and my change in career paths is very simple. I believe in this product and the value it delivers to low to middle income workers.

Cheryl Gurz (00:49):

Hi, Cheryl Gerz, I am the RTP Product Manager at the Clearinghouse. We run the RTP network, which has been up and running since 2017, and my job is to help educate the corporate community and the banks to find ways to drive adoption.

Doug Sturm-Smith (01:09):

And I'm Doug Sturm-Smith. I'm a senior Vice President of Immediate Payments at PNC I oversee our RTP product as well as other items such as intelligent routing, push to card, our Z disbursements product. We have a business to consumer product that we have as well. So oversee all of those immediate payments for PNC.

John Adams (01:31):

Okay, great. Thank you for joining us today. We'll start by going on the table again. How far away are we getting from the traditional two week pay cycle? You mean just very basic? How is payroll different than it was even just three or four years ago?

Rob Nardelli (01:48):

Yeah, well, I'm going to go a little bit further back than three or four years. So earned wage access is what my company does, helping folks get paid as they earn it in real time and not having to wait until regularly scheduled payday. So real-time payments has completely shook up this sleepy space, the best innovation in the last 80 years. And oh by the way, it's the only innovation other than direct deposit in the last 80 years. So real time payments is the vessel that helps us get those payments out in real time. So yeah, I'd say it's changing things up for the better.

Doug Sturm-Smith (02:26):

And even to go back a little even further than that, I came from product innovation, product development and a file landed on my desk called Faster Payments years ago. And one of the first things that we took a look at where opportunities were at with faster payments, and one of the items that came up right away was, where are all the payments at? And that's in the payroll, payroll sector. And when we started looking at that, we thought of how different payroll could be, but we didn't necessarily grasp the idea of this earned wage access back then. We started seeing items such as people wanting to get paid for Gig economy, independent contract work, those types of items. What we started then to see is, okay, where do we find opportunities for payroll for in the real-time payment space? And we took a look at emergency payroll, off cycle payroll. We took items such as last day pay, those types of items where that might make sense. But what we didn't necessarily realize years ago was what Rob and his team was working on over at Daily Pay, which was the earned wage access piece. And that's when we really started to take a look at what does that mean for immediate payments? What does that mean for real time payments? And that's when we started really starting to have the conversations about how that's going to change earn or how that's going to change payroll moving forward. We've come a long way over those last few years and we continue to see what the opportunity is there for the earned wage space. I think Rob knows, or Rob's got some stats or information about how much really earned wage plays in the whole payroll space today.

Cheryl Gurz (04:08):

And I would add on to everything they've said by looking at 2014, 15 when we as the operator had to put a business case together for a brand new network called Realtime Payments. And I will tell you payroll did not play a very big place in the business case. It was our thinking back then. Traditional payroll would stay on ACH because it's been so to your point, ingrained, it was very reasonable for the large payroll processors to just send their files in two days before and have the payments go on their traditional weekly, monthly, biweekly schedule. So when we start watching how the network was being used in the last couple years, it really surprised us the amount of activities because the traditional business model of payroll was transitioning and because there was an instant payment, real-time payment capability, now it helped drive them and then they drove traffic to our network. We still are seeing on our network activity, and we're still actually, and I think you'll go into this a little more, Rob definition of payroll has completely changed. It's not just earn wage access, it's on demand payroll, it's pay day loans. There's also 10 99, which could be considered a payroll. So there's so many different things that have happened and you're not seeing a lift and shift. You're seeing a add-on in volume in the payment networks and most of it driven by new entrants like yourself, really redesigning and rethinking what payroll should be.

Rob Nardelli (06:12):

And if I could, John, just to add in terms of what has happened here daily pay, not even a company seven and a half years ago, I think all the payment geeks here at the conference who you are, I think we know that Venmo slash PayPal is a number one consumer of RTP. Little known fact is a daily pay is a number two consumer of real-time payments.

John Adams (06:39):

Now, as you mentioned payroll, the actual definition of what that means is changing and it's changing rapidly. What kind of potential challenges does that create? I mean, what do folks not understand about that? And also at the same time, I would imagine that would create some opportunity for you as well to lean into that, to lean into these changes.

Rob Nardelli (06:59):

Yeah. Well, and I think we're doing this whole trip of memory lane here. When you look over what's happened the last 80 years as aforementioned been historically a very sleepy side of banking and that's now heating up. And one of the reasons presently that we're seeing for this need is inflation need proof. 12 million Americans had to resort to nefarious payday loans last year that didn't have the option of earned wage access. So with that option out there, We and I'll say it loud and clear for all to hear plan on taking good old Larry Lone shark out of business.

Cheryl Gurz (07:50):

It's also been very difficult for us as a network. Everyone comes to us and say, what are the use cases? What are the segments? And everyone says payroll. And I look at those numbers every day on who's sending payments into the network. And I'm a career banker, moved into infrastructure provider three years ago. I'm having a hard time determining what some of these new companies are doing. The branding has changed, payday lending isn't payday lending anymore. There's one, I went in there and I'm like, read the website eight times and I'm like, wow, marketing has really changed. You can't even tell what some of these companies are providing. It's all under payroll. But if you go deeper and then you look at things like factoring is that payroll? So we have a lot of truckers that are independent contractors, so that's their payroll, right? The 10 99, but they're now selling their receivable to another company because they want that payroll in advance. So there's so many different flavors out there, so many fintechs, new businesses coming up with how do I do things around the payroll echo the value add systems and products. So for us, it gets kind of hard putting these numbers together on what companies to consider a payroll and what not to consider a payroll today.

John Adams (09:14):

And the subject of let's say, differentiation from payday lending, if that's the goal. What are some of the things that you do or say that to distinguish this, well, this is the type of payroll we're doing and here's how it's different from these type of emergency options in the past.

Rob Nardelli (09:34):

And it's earned wage access. So it's your money, you've earned it. Why shouldn't you have the flexibility and control to gain access to those funds and when you should need it?

Cheryl Gurz (09:47):

And then where some of the others are doing, you've earned it, but we don't have proof of that earning because we're not connected to payroll companies. So we're going to take your last paycheck and give you a short term relief and give you the ability to get some money, but you're going to pay us back. We're going to ACH debit your checking account the day that you tell us your payroll. So they're taking a risk. And the other one is the new, I think on demand, not on demand. It's the one where two days, the two day early. So your ACH file is already at your bank for a Friday, traditionally access for you. But the bank is taking the payment risk and saying, I'm going to let you take those funds out two days early so you don't have to go to one of those other companies. I'm not losing you to somewhere else. And then of course, the 10 99's, which are, they're getting cash outs. Most of your transportation companies are the grubhubs and the food people. They're letting them take their earnings out. I saw this one customer, this one driver take it 10 times in a 12 hour shift. So they're able, because of instant payments, they're almost micro payments now you've taken maybe a paycheck at the end of the week for $300, that would be terrible. Paycheck 300, you're taking $30 out every couple hours so you can go and get gas and continue on your route to make some more money. So all these things are blurring into the payroll bucket.

Doug Sturm-Smith (11:39):

And I want a couple other thoughts here. First of all, I think consumer expectations are really changing as well. We live everywhere else in such an instant economy, so to speak, of making payments and receiving payments. And I can pay you for pizza, but I can't get my payroll immediately. And those are what that changing expectation has happened as well. Where at PNC we've seen that where to say, Hey, you don't, I don't necessarily as a consumer want to lend my wages out to my employer for two weeks anymore. I want to get paid the day that I actually worked. And so that consumer expectation is changing as well. What we've done at PNC, even over the last year or so, there's waived NSF fees. We've also done just what Cheryl was talking about. We've put things about low cash mode in at PNC, but then we've also now done a white label of what's called PNC earned it, which is a white label of daily pays product because we're getting it even from our corporate customers, our commercial customers asking about how can they fit in this earned wage access space. So it has been changing even from PNC standpoint as far as saying this is a space that is an opportunity for growth even for the bank.

John Adams (12:58):

Okay. Well, thank you. One thing I wanted to mention, we are open for questions at all times, so any question from the audience is welcome at any time. Oh, we've no wonder question and I think we should have a microphone coming.

Audience Member 1 (13:24):

Talked a lot about the earned wage, relying on a real time payment to get that very quickly into the consumer's hand. Are you seeing any demand from corporations who maybe want to be more competitive as an employer to go, okay, traditionally we've done our full payroll on ACH, we're actually going to transition that full volume across to RTP for those clients whose banks will allow them to receive that RTP payment. Is that something that you are thinking about or seeing a demand for at all?

Rob Nardelli (13:56):

That's exactly what we do. So to cement that, we have hundreds and hundreds of payroll and time and attendance systems that we're already fully integrated with. So if Mr. And Mrs. Employer works with ADP and Workday is their time and attendance company, we work with those companies all day long. So Mr. And Mrs. Employer flips the switch, gives this benefit to help empower their employees on their financial wellness journey. And then they get access or rather we get access to their back office payroll. And that's how we know in real time whatever is in that back office payroll system is precisely what's going to show up in the available balance in the app.

Cheryl Gurz (14:41):

And that's what completely changes it from the other models of where they're seeing a previous paycheck and taking a, they're giving you a loan on that even though they don't know if you even had that same payroll for this week. Very different.

Doug Sturm-Smith (15:01):

And we also view it as a competitive benefit for the employer to offer as well. Being able to offer that as a payment or distribution out against your wages. It's a very compelling story to be able to have to say to your employees, we've even taken, we even know that there's employees out there who stand in line at a grocery store estimate that they're going to need $80 to pay the bill on their way home after they've just spent 10 hours working a long shift maybe at an hourly job. And now they need to make, now they need to stop at home with the wages that they've just earned in order to buy those groceries. And what they can do is check that balance on that and through RTP or a push to card type of a transaction, they know right away that payment's available and inside their account by the time they go from the back of the line of the grocery store to the front of the line. And that immediacy of that payment has changed all of that as well.

Rob Nardelli (15:59):

And that's important to note, right? Realtime payments gives us the vessel, the power, the engine behind our service so we can get folks their money if and when they should need it.

John Adams (16:11):

Yeah. I think we had a question down here in the front. Okay, we have a microphone on the way.

Audience Member 2 (16:22):

Have you seen resistance amongst banks from a float monetization point of view with offering real-time payment? So previously they would've held those funds and earned interest on the bank slide and then moving to this rail. Does that erode that revenue stream?

Rob Nardelli (16:40):

I want to make sure I heard the question. What I heard was is our banks or against what we're doing more or less

Audience Member 2 (16:49):

Is their resistance because if there's less erode their profitability or their revenue stream coming from?

Rob Nardelli (16:56):

Well not P and C shameless plug. So when it comes to the other options, we talked about payday lending, Larry, loan Shark, I think everyone in the room knows my thoughts on that matter. The other option these folks have is overdraft fees. I think about myself in my twenties living in Manhattan when the rent check was due around the same time as the Amex auto pay, that one rent check could trigger multiple overdraft fees. So in terms of what we offer and partnering with banks like PNC, is the ability, the most fiscally responsible way for banks to move away from overdraft fees and offer this benefit that helps folks on the financial wellness journey as opposed to penalizing them?

Cheryl Gurz (17:48):

I just want to kind of bring up, cause we keep talking about it's real-time payments that enables this. Theoretically you could do it with same day ACH, right? But the real reason real-time payments is helped because the network is up 24 7. So if that individual decides to take their draw into their earned access and it's Friday outside banking hours at 6:00 PM you're able to use the real-time payment network to ensure that when they're at that grocery store making that purchase, it's there in five seconds. It's not just, it's 24 7 and it's used 24 7 and it's also the confirmation. So there's a confirmation aspect of this that Daily Pay will know that Cheryl Gurz did receive that in five seconds. So it's not lost in space. There's an immediate yes or no, that money went into that account number. So it really helps the individuals. From my point of view, I see some of the volumes doing their weekend. There was an economist and a couple weeks ago in a conference that was talking about how difficult it is right now with inflation for the people in America making 50,000 and under how they go. And now because of the inflation impacts have to take $20 out to buy their gas. Where before they might have filled it up the same with groceries. How do I go and try? So this financial wellness that the daily paid earn earned wage access is allowing is really its time as today with where the economy is along with general wellness, financial wellness, which many banks and many others have been working with customers for years and trying to provide products to help to get rid of those overdraft fees.

Doug Sturm-Smith (19:54):

Yeah, another key word I heard in there was flow. And there was a question earlier today as well in an earlier session regarding how it's flowed in real time payments and how do they work or butt heads together so to speak. And really one of the things that is changing is really about that immediate payment type. It's about making that payment when it needs to be made or when it needs to be done. So now for example, I can time my payment at 5:00 PM on the very last day that it's due and I have that opportunity to use that cash up until that time. So I think there's some questions about how does float work and getting rid of float versus RTP, those types of items as well. What we really are starting to take a look at is also a change in the dynamics of how cash management really works throughout the day. It's not a full day settlement anymore, it's a real-time settlement. I think that's one of those items that as we move forward, a bunch of companies are going to have to also start thinking about as far as saying, how do I do cash management in real time rather than at the end of the day

John Adams (21:00):

Well have some stats here on the gig economy, which is a very big part of this. McKenzie estimates about 36% of Americans participate in the gig economy presently. And the status is by 2027, half of the US population will have engaged in gig work in some form. That's a massive number of people. How important is the work that you're doing in serving that type of market where people don't basically get paid as they go.

Rob Nardelli (21:34):

And the answer is no longer Gen Z expects to get paid, right? Because their Netflix is how they consume their media, Uber is how they get around town. This use case is for everyone and I think that's the trend that we're seeing. Bloomberg released a study recently of 166 Americans reported their living paycheck to paycheck. So if the bill is due Tuesday and payday is Friday, they've earned roughly three quarters of their paycheck, but they can't gain access to it without having earned wage access. So the shift in what we're seeing is that this is the first tool and many that we plan on launching to create that financial wellness journey of helping folks get through living paycheck to paycheck and having to make ends meet.

Cheryl Gurz (22:22):

And I think the difference between the payroll earn wage access and the 10 99's is that the solution for daily pay, as you just mentioned with the corporates all going and there's a consolidation, their paychecks or whatever, the gig economy, it's really up to their employer to put cash outs and putting their own processes in place. So if I looked at last month's April data, I quickly looked this morning and we did 2.8 under that payroll traditional, well non-traditional payroll million payments and we did 1.9 million under gig. So the process is different because no, we don't seem to be seeing, we see the gig, they're cash outs that the gig employers are designing for their specific business and they're using the payouts, cash outs, payouts as a competitive advantage of why you come work for us. Because you can come out, you can use our app and just continuously ask for money to go into your checking accounts where the payroll, there's taxes are taken out, all those other deductions and you're able to look all that through your connections with all of the players in that payroll value chain where the gigs a little different. So I wonder as I look at the numbers, will it consolidates somehow where the 10 99 get the same access because they are so dependent on their employer that's sending out that 10 99 to design apps, design product individually. There's not a consolidator helping them get the money.

John Adams (24:25):

Cheryl, you mentioned it briefly, the idea of recruiting. How can and how is this being used for recruiting for business to recruit staff or whether contract work or full-time work?

Cheryl Gurz (24:38):

Yeah, I mean we've done a lot of analysis at our company to try to figure out what the market size is and it is just amazing. I think you and I just anecdotally, if you go outside and look at restaurants and you go look at fast foods, they are using that today aggressively to say you can leave a shift. I live in New York City, I was at one of the large employers H and M and always lines and they were waiting and one lady was like, I'm leaving. And she looked at her supervisor and says, I can cash out my paycheck right now. I mean, it's becoming part of the vernacular of if I'm going to work certain jobs, I am going to go to the employer that gives me my pay when I walk out. And to your point, I remember in college I would love to have gotten my paycheck every Friday and Saturday night, just what I earned at least for the day. But it is really changing the dynamics of what are the benefits. And I've also, I think you have in some other larger companies, they are also looking in their customer service departments. It's not just the retailers and the restaurants, but I've started to see a switch in some of the advertising of large corporates also saying that that is offered to them. It's who you're reaching is also using that. So it is truly becoming part of the, I wouldn't say the baby boomers but it's the other demographics that are younger that are going to expect this every single time they go to a new job.

Rob Nardelli (26:25):

And just to add to that, Thank you Cheryl. Recruitment and retention is what this tool does for employers more so than anything. And that's the stats that we see there that folks are staying twice as long and they can recruit people in half the time. To your point, if you work at McDonald's or you work at Burger King and the Burger King says we offer earn wage access work today, get paid today. Well most people are, if it's the same rate, are going to go work there. So it's a meaningful benefit for those employers to offer to their employees.

Cheryl Gurz (27:00):

And Rob just one thing, they don't have to take it daily. They can select that they want it on a Wednesday or they may not take it at all on a certain week. It's their choice of when they cash out.

Rob Nardelli (27:12):

Yes, flexibility and control and the beauty of free will, right? It's your choice. If you don't want our product, don't sign up for our product. If you do give you that flexibility.

John Adams (27:25):

I think we have a question.

Audience Member 3 (27:29):

I'm curious about the employer's experience with reporting and taxes and is there a lift, is there a change in that process?

Cheryl Gurz (27:42):

The reporting?

Rob Nardelli (27:47):

Oh no. And that's probably one of the biggest benefits, right? We're not going to change MR and Miss's employer your normal payroll processes, process payroll the way you normally do and we're not going to mess, if you will with your working capital. You just keep paying it. We daily pay are the good folks that fund that payment and then recoup that payment on normally scheduled payday takes a pit stop at daily pay and their remainder pay goes to the employee. The experience, no latencies in pay.

John Adams (28:19):

We've discussed, oh, I think Stephanie, we have another question. Okay,

Audience Member 4 (28:26):

So is there a cost to the employee for the earn wage access?

Rob Nardelli (28:31):

There we go. It is the American Banker's Conference, right? So there is if you can wait till next day, let me take a step back. If you're the employer, it is at no cost other than the time it takes to implement the solution you want. You don't want to make this onerous on the employer or they'll never go for it in terms of the employees to have access to their funds as they earn it. If they can wait until the next business day, which will use good old reliable ACH, that is free at no cost. Now if you need an instant and you want that benefit, Doug's example of being on the grocery line and realizing you don't have any money to pay for these groceries while you can't wait till next day, we charge a small nominal ATM like fee of 3.49 to gain access to those funds instantly.

Doug Sturm-Smith (29:20):

That's one of the things early that we learned with realtime payments as well from a business to consumer side as well, not only in this use case, but just generally with realtime payments is when we went out and started saying, Hey, if people want access to this money quickly, do they want the confirmation, the final settlement, irrevocability, everything else that comes with real time payments? Well basically what we're finding is about a cup of coffee is about the price is what people are willing to pay for an instant payout.

Cheryl Gurz (29:49):

And I would say on the network today, probably the top 50 dispersers are amazing to us, but every one of those charges a fee and their customer base are recurring customers. So it's a lot of digital wallet disbursements and they are continuing to see their account numbers month after month after month. And they're, we know there's fees, we don't, as the operator, we don't know what fees are being charged, but we are consumers too. So we'll go and try the product at certain time and see what the fees are. And it's amazing because customers, especially as you said, the consumer experience today having it now there's a value to many of them. It depends. Some won't, some will. And it depends how important it is to them to have that money at the point in time when they need it. And to your point, it's precision payments. It's about I need this at eight o'clock on a Friday night, I need this at 11:00 PM I need this outside of banking hours. I am going to pay that premium to have this payment and also to know that no one's going to take it back from me.

John Adams (31:06):

Now the RTP network has existed for several years and there's about to be an additional network shortly. How does that impact either earn the wage access and other payroll functions? I mean obviously it plays a big impact, but as real-time pay becomes more available and grows, how much more important a part of your business is it becoming?

Rob Nardelli (31:32):

So I noticed you didn't say them by name, but as of July 01, the Fed Now is entering the payments airspace. Fed Now does not change our product materially. However, it gives us another option. And the fact that the clearinghouse and the Fed are working together and being so casual about offering this faster secure, more reliable payment for less than a nickel to banks is really impressive. And that helps us be able to provide that value added service because it's affordable to our consumers.

Doug Sturm-Smith (32:08):

Yeah, it's all about endpoints there, right? It's about how many consumers can you reach so to speak. And we've been talking about ubiquity on the real-time payment network ever since it first started. And that's what Fed Now at this point in time looks like it. It's just an additional way to reach those endpoints. So it allows for more of those payments to move faster.

Cheryl Gurz (32:34):

And we welcome an additional operator, actually the clearinghouse runs chips. We were on ACH system, we run check system. Every one of those three systems, we run it and so does Fed. So now we're just adding the fourth one and our Fed who becomes our partner and our regulator. So it is a little different than other competition out in the marketplace, but we know each other well. We respect each other. Well, there are 8,000 financial institutions in the United States. We have 300 and I think 25 the last count on our network. And that represents 65. And we can reach the banks, we provide reach to 65% of checking accounts in the United States in order now to go to that next 35% With the 8,000 banks left, there's not I think a single bank that will give us another percentage. It is the long tail that's representative of the United States' banking system and having help with the Fed, helping in the business development and trying to reach banks that we they want don't want to come to us for some reason or they want to go to the Fed instead of the clearinghouse. It is only the best thing for all of us is as part of the US marketplace and for any company that wants to hit everybody, every community bank, every credit union should be able to have access. There is no mandate by our government for banks to use the real-time payment network, the Fed Now network, and then without a mandate we are just adding more payment methods and we have to try as much as we can to bring this safe, secure, faster option into the mainstream. So yes, at days I have struggles as a product manager that I have a new competitor, but as other days I'm glad they're there because ultimately it's all about the benefits to everybody.

Doug Sturm-Smith (34:56):

Yeah, one other item about Fed Now that we're seeing is really what it's been doing is driving conversation about immediate payments. And from our standpoint, immediate payments is here today, it's available now. So when we have those discussions with our corporate and commercial clients and our business banking clients, they do ask the question about, oh Fed Now what does that mean? And right now we can say we've got five years of experience already with immediate payments today and we know how those businesses and use cases work. So we're able to have that conversation with our clients and say that it is available today, we don't have to wait for Fed Now and we can move forward with immediate payments.

Cheryl Gurz (35:36):

Yeah, that's exactly

Rob Nardelli (35:36):

Right. And the final point I'll say is for our instant option we do use OCT, which is the push to card payment where RTP is not enabled. So having Fed Now increasing and having a third option is just great and that's just going to help bring down that pricing point for the banks and the companies that use their payment rails to power their solution.

John Adams (36:00):

This is a bit of a tech question. It came up this morning, how fast and how frequently can people get paid? In other words, there was discussion how close you get to, can you get to getting earning as you work literally, is that even possible?

Rob Nardelli (36:16):

Yes. So I'm going to give a long-winded answer if you'll bear with me. So our solution, the available balance gets calculated at least every 15 minutes. So it is as close to as real time as can be provided. And one of the things that we noticed is that folks are looking at their available balance at least five times a week. That's not saying they're transacting five times, but they're looking at their phone and they're seeing that those funds and when they should need them are available to them. And what that does in terms of financial stress reduction is empowering.

Cheryl Gurz (36:57):

And we're seeing so many conversations by businesses around micropayments and that's what the technology, the cost and the reach bring the instant immediate payments isn't really about lifting and shifting. Don't just take an ACH file and send it you, I'll take the value. But the whole purpose of bringing a new way to pay in the United States was how do we use this to embed into business models and find new ways to provide services and value to consumers and businesses as consumers. So micro payments are now reachable because you have the 24 7, you have the ability for a lower cost way. Some of the insurance companies are talking about real time payment enabling conversations they've had for years where you pay your insurance based on the ride if you use your car, a micro payment of $6 instead of a monthly car payment of $400, I'm in Florida. So it's very high. It's more supported by an instant payment system because you can do it quickly in technology and interaction. So there are so many discussions to your point because of the technology enablement of increasing transaction volume because breaking down traditional core batch payment into a hundred individual micro deposits payments.

Doug Sturm-Smith (38:45):

And just to answer your question about how fast is it, just to let you know when we receive an initiation, let's save from daily pay in order to go ahead and pay a consumer, by the time that it comes to us goes out to the other bank, we receive confirmation that the other bank has already made those funds available back to the client. I know that the A clearinghouse has certain service level requirements that we have to have in order for that to happen. I generally see all that happen under two seconds. So in other words, by the time that they hit, yes, they need to have their funds available. By the time they refresh their screen, it's already in their bank account

Cheryl Gurz (39:23):

And you're going to say faster fraud. We hear that again, the point is that that SLA of two seconds is from the time the bank enters it into the network, they can wait a week before they finish their fraud reviews before they release it. So there are still all of the fraud and security reviews do being completed by the financial institutions. And financial institutions are the only ones on the Fed Now and the clearinghouse that are able to use the secure connections to exchange these messages. So they're it I keep hearing you're going in five seconds for the fraud is so much faster, but there's obligations by the sending bank to do all their fraud reviews, the same fraud reviews they would do with a wire, with an ACH. It's all being done by the sending banks and they actually have other obligations. There's obligations on certain payments that they have to know that the receiving account is valid. So there's many obligations on the sending bank that once they receive the order from daily pay or the order from a consumer that they do their due diligence before releasing it for that two second settlement.

John Adams (40:43):

Okay. Let's see. Do we have any more questions? I think we have walking

Cheryl Gurz (40:52):

One other use case I just wanted to mention is the emergency pay. Many states, if you're let go during the day, they have to be paid their payroll by the end of the day. And that's real time in immediate payments completely changed that whole process on a very positive for employers handling that workflow.

Rob Nardelli (41:13):

Yeah, Thank you Cheryl. That cycle is a feature of daily pay that allows for off cycle payments including termination pay or anything else that might be off cycle. And to the earlier question, we help reconcile that for the companies, which is a big value to the employers.

Audience Member 5 (41:29):

Thank you for the time. Just had a sort of two-part question. One is, what are the impediments to people who are not on maybe hourly wages who also would be apt users of earned wage access? And maybe it's the same question, but for things like food delivery, you can have instant verification from the app or the network that the task was completed is the only workaround for tasks that can't be immediately validated to reference the prior paycheck. Just any color you can offer on that. Thank you.

Rob Nardelli (42:08):

Sure. The sounds like there was two questions there. The first one was around impediments. Would you mind just further clarifying

Audience Member 5 (42:17):

If we could snap our fingers and everybody all had earned wage access tomorrow versus if that were not possible, what would be the reason or reasons that that's not possible?

Rob Nardelli (42:29):

Well, because we go through those painstaking steps of plugging into the back office, unlike some of the competitors and nefarious fringe elements out there, our focus is on anyone, not just hourly, but anyone up to $100 in hourly pay or any salaried worker up to 200 k, an annual base salary we service today and we're working towards other ways that we can help folks above 200 k. I hope those folks have enough money to bag their groceries. But to your point, this is a use case for everyone and that's what we're building towards. And right now we do cover the heavy majority of those folks, but we're going employer by employer to enable those folks earn wage access.

Cheryl Gurz (43:17):

And I think one of the impediments then is not everyone uses the large payroll providers, so some use their local accountants or bookkeepers. So how do you reach all of the numerous payroll providers outside of the top few that everyone knows? Because people in Middle America don't always use adp, they use regional or local providers and connecting. That would be a part of your impediment.

Rob Nardelli (43:54):

Yes, it would. Thank you Cheryl. And that's a great point to highlight. So Daily pays position on this is very clear. We will connect with anybody. I repeat anybody. The only caveat that we have currently, and we're working on this one too, is we service up to 400 eligible employees per business. It is a dollars and cents exercise. So if you have at least 400 eligible employees, we will find a way to connect with whomever and however you're processing your payroll and we're working on getting that number down lower to help the small business folks out there who also need to activate this for their employees.

John Adams (44:31):

We have a couple minutes left. I thought it would, if there was one or two takeaways from this issue, faster pay, real time payments and payroll that we should come away with today, what would they be?

Doug Sturm-Smith (44:48):

One thing I'll add, and we didn't necessarily touch on it here as well, but another way that real-time payments is starting to take a look at shaking up the payroll space as well is we're working with the clearinghouse. Number of banks are about requests for payment and how that works. One of the pieces that we didn't talk about today was the payroll funding side as well. And what we're seeing as a transition or a discussion with a lot of payroll providers about what they do from a credit risk standpoint to be able to allow the funds to come in on let's say a Wednesday for a Friday payroll. And one of those items is they want to move away either from an ACH debit kind of position, they don't want to do the draw down wires or a wire in order to do it because of fees. Those types of items as well. And we're really starting to see a lot more interest in that request for payment piece on the payroll funding side used to be a little bit of an impediment with the dollar amount that was associated with real-time payments since it's moved to a million dollars. A lot of that space that we're seeing in that more of that commercial or small business size really fits well into that request for payment space for payroll as well.

Cheryl Gurz (46:01):

And I was fortunate to be at one of our corporate advisory group meetings the Monday after the bank issues for Silicone Valley Bank, the closures. And it was one comment from the woman that represented the payroll provider and she's like, if everyone had real time payments, we wouldn't be scrambling for all of these payroll issues that were very much in the news during that week. So payroll is not just about the convenience to the consumer, but the systematic industry risk. If you're using real-time payments for payroll, again to the funding side, we are realtime payments in the Fed Now network will both be credit push networks only, which means no one can come into your account ever through realtime payments and take any money out even if you authorize them or not authorize them. So our solution for the funding to get money out is this request for payment, which is a non-financial message that would go to the small business and say, oh, ADP has asked you to fund your payroll before we send it out. And they'd be able to at that moment make the payment directly to their bank and then the payroll to their employees could be sent out immediately. So there's none of that timeline, none of the risk, all the risk that was on the newspapers all weekend and on TV, that would all help. And I think that's an important message for everyone to take a look around payroll and recognize there's still, even though it's traditional and everyone receives it every two weeks, there's still risk in that process in real time payments with different companies such as Daily Pay are finding ways to take that risk out because nobody wants to be on a Friday trying to get your paycheck and it's not there.

Rob Nardelli (48:00):

Those are great examples. The domestically, what we're looking into in our R and D lab is how can we help folks on their financial wellness journey, right? Earn wage access is a great product. It's the beginning of what we plan to achieve in providing value to these folks as they're on that journey. Some of the other things that we're looking into is how could we use real-time payments in other ways like bill pay if you don't have any money left in your available balance, going back to that electricity bill due Tuesday scenario. Well, how could you use your available balance to make sure that you have no latencies in pay and all the fees that come with it. And then globally more broadly in the instant payment world. Another thing that we're investigating is, well, what if we were able to help folks get money cross border and specifically your Uncle Louie down in Mexico, same example Tuesday. If he doesn't pay the bill, they're going to turn the lights out. Well what if you had the ability to draw from your available balance and send that payment instantly to Uncle Louie so he can pay that electrical bill?

John Adams (49:07):

Well, I think we are at time. I want to thank Cheryl, Rob and Doug for a great panel. Thank you. And thank everybody for attending.