Earned wage access is the future of payroll, and community banks should be the ones making it available to companies and their employees.
EWA is a service employers offer with their financial institution and payroll processor that makes it possible for employees to collect their pay whenever they want. Forget about the monthly, biweekly or weekly paycheck. With EWA, an employee can receive by direct deposit the money they have earned up to that moment. This is not a payday loan or salary advance. This is simply getting the money the employee already has earned without waiting until the traditional payday.
You’ve probably seen the commercials on TV from banks that offer access to direct deposited paychecks a couple days early. That’s cool, but EWA takes the concept a step further, allowing an employee to collect their pay at any time. There are a few fintechs offering this service and each works slightly differently, but in theory, an employee could use the service to collect a portion of their pay everyday. Reports note employees at PayPal and McDonald’s can choose EWA; at Walmart, about a third of its U.S. employees use EWA.
If you think it’s not a big deal to get your earned wages a little sooner, you’d be in the minority. Surveys tell us that a substantial number of people live paycheck to paycheck. And these folks are not necessarily low-wage earners. Even among people who earn a six-figure salary, most folks have only a month or two of expenses banked. Immediate access to wages makes it a little easier for many of these folks to manage their financial affairs.
In a world where payments are increasingly moving to real time, it makes sense that people would begin to expect to be paid in real time, or close to it. With software to track wages and withholdings, there really is no reason for a company to wait for a designated payday to compensate its employees.
I guarantee you will be hearing more about EWA. This is a service where community banks can take the lead. Figure out how to offer it to your best employers. You will be helping them offer a valuable service, and you’ll be doing yourself a favor too, as the transaction fees add up. There are all kinds of fintech partnership opportunities out there. I think this is one worth exploring.