A new fintech, Paytime, has launched in Australia, offering earned wage access to employees that need money before their pay cycle.
Earned wage access has a higher take up in the US and UK than Australia, with major retailers — including Walmart — already offering it to employers.
It allows hours worked by an employee to be paid out to them before their pay cycle, at a small fee which can be paid by the employer on a subscription model, or at a cost for the employee. In a similar vein to payday loans, it allows employees to cover short-term cash flow problems, but without the predatory interest rates.
While Paytime doesn’t publicise its fee per withdrawal, it says it is about the cost of a cup of coffee. Paytime strategic growth director, Fran Ereira says the app doesn’t charge set up or implementation fees, with its business model solely taking revenue per withdrawal.
“Individuals don’t understand that the radio ads for loans charge annualised interest of 120%”, says Ereira.
With financial stress a key factor in mental health, Paytime is angling to be the ‘RUOK Day of finance’, according to Ereira. The app offers outlinks to mental health services and information, including the Black Dog Institute and Beyond Blue, five helplines, and financial wellbeing tools, she says.
The company says it does not track how its users use the mental health services, which appear as tiles on the app and send them directly to the service providers.
Individual employees are also identified by number instead of name, so that employers don’t have immediate oversight of who is taking their money early, and when.
If an employee is using the service problematically, or needing to withdraw money every day (which many be indicative of serious financial stress, gambling or drug addictions), the employer can pick up on that and look in their own systems to identify them.
“You can limit those to once a week, fortnight, or month. Employers can use whatever guardrails they feel are necessary,” says Ereira.
The app also includes a tool called Equip to formalise saving for employees, and let them move money from their spending to savings accounts in automated transactions.
National Retail Association CEO, Dominique Lamb, says, “From the industry research we’ve seen, businesses can expect to see higher productivity, a better culture, and lower staff turnover. In retail, manufacturing and healthcare, where shift workers can access their pay after their shift instead of waiting a week or two, the benefits are already evident.”
KPMG cites a survey commissioned by Visa and undertaken by AYTM, which examined 1,000 workers across the state. From that pool, 79% said they would be ‘willing to switch to an employer offering earned wage access if an opportunity was available’.
Retailers should note that only 15% of those interviewed are from the sector.
Considering the extra costs involved to speed up payroll times, and the expense of paying accountants, or accounts teams, at a surface level earned wage access programs like Paytime seem to be a simple and cheap alternative.
But given that employees would then be left with less money in their take home pay (having taken some of it in advance) it’s not a complete solution to solving financial stress.
As one Walmart employee told the New York Times when discussing earned wage access in 2017, “I would prefer it if they gave me more hours.”