Earned Wage Access (EWA), also known as on-demand pay, is an emerging technology-enabled solution allowing employers to provide hourly employees early access to wages they’ve earned. For workers at companies like McDonald’s, Neiman Marcus, Kroger, Walmart and Hilton, gone are the days of waiting weeks in between paychecks.
In case the concept of EWA is new to you, there’s a good reason—the industry is not even a decade old. With the competitive labor market and rise in inflation, EWA has emerged as a way to provide a valuable benefit to employees or contractors. There are several models being offered to achieve this in the U.S. EWA platforms like Payactiv, DailyPay and InstantFinancial offer employers and employees an array of services that promote payroll efficiency, employee satisfaction and retention, financial wellness and real-time access to wages.
The COVID-19 pandemic heightened the need for new payment methods like EWA and on-demand pay as millions of workers abruptly faced financial insecurity in the face of business closures and suspended services.
In 2019, EWA was offered by just 5% of large U.S. companies with a majority of hourly employees, according to Gartner research and the Society for Human Resources Management. By 2023, however, the number of companies offering EWA is expected to reach 20%.
For EWA platforms and businesses looking to differentiate themselves, making funds available to employees on demand is crucial to the success of this new industry.
Payment Methods Proving Value to EWA
Push-to-card, or push-to-debit, is a popular payment method for EWA platforms. For example, an employee working for a company offering an EWA benefit may be issued a debit card to receive their hourly pay more frequently than their traditional payday.
The amount of money facilitated by EWA providers has grown 196% from $3.2 billion in 2018 to $9.5 billion in 2020, according to a 2021 report.
But the card rails aren’t the only way EWA benefits can be administered.
The RTP® network from The Clearing House is a real-time payments platform changing the way electronic payouts are administered.
Like EWA, real-time payments are an emerging payment method that has gained popularity in recent years. According to The Clearing House, “EWA is the fastest growing use case on the RTP® network.”
Not only is EWA an attractive and meaningful benefit for current employees, it also can be used as a hiring tool as an unprecedented number of workers quit their jobs in search of better pay, benefits and work environment.
“In a tight labor market, additional perks often attract new employees and help retain existing workers,” says The Clearing House Senior Vice President Elena Whisler. “Allowing workers to access earned wages on their own schedule, on demand in real time, is one benefit many forward-thinking employers are offering today.”
Real-time payments enable innovative payroll offerings like EWA by giving recipients access to funds within seconds of the sending back initiating the transaction. Real-time payments are available 24/7/365 and are not subject to weekends or banking holidays.
The ACH Network is another viable option for EWA payouts, particularly faster payment methods like Same Day ACH. A Same Day ACH transaction can be available in the recipient’s bank account on the same business day it was initiated by the sending bank.
Advance the EWA Experience
Depending on how fast your business needs transactions to move—and how much control your business wants to have—would determine which payment type is best for your use case.
The Dwolla team continues to innovate around faster payment options. Contact us to talk through your use case and how faster payments can add value to your services.