PNC Helps Provide Salary Advances Even Faster | Payments Source
Many fintechs specialize in giving workers some or all of their income before the traditional two-week pay cycle, but DailyPay uses real-time payments as a differentiator. DailyPay recently became the first to add the functionality through a partnership with PNC Bank and The Clearing House’s RTP network.
While most providers use push-to-debit options that provide near real-time funds, RTP is not a day or night difference. But leveraging the RTP network adds a few benefits that could expand banks’ participation in Earned Wage Access, or EWA.
The RTP network provides immediate confirmation that EWA funds have been successfully delivered, which is essential for employees who avoid late fees by paying invoices at the last minute, according to Chris Ward, executive vice president and head of business. digital technology and innovation for PNC Treasury Management.
“Speed and certainty are the two most important aspects of payments for financially insecure workers, and early access to pay is a great use case for RTP,” said Ward. “In push to debit, you receive an authorization notice, but there are nuances that are not absolute confirmation like you get with RTP.”
New data sheds light on why timing is essential for EWA users.
In a survey conducted by Arizent in the first quarter of this year of 494 American adults who used an EWA service, 77% of those surveyed said they chose to receive funds instantly or on the same day.
About a third (33%) of EWA users with a family income of less than $ 50,000 first used EWA for rent payment, while 31% of EWA users with a family income of up to 99,000 $ used the service to pay an unexpected bill.
As more and more Zelle transactions begin to flow over the RTP network, Ward sees other ways for the faster payment option to benefit EWA operations.
“In the future, an employee signing up for DailyPay would only need to provide their Zelle ID – usually a cell phone number – to avoid the friction of the onboarding process by not having to enter all of their information. personal and account, ”said Ward.
Earlier this year, PNC Bank and Bank of America were the first to announce their intention to clear Zelle transactions on the RTP network.
PNC says it is in talks with other companies that plan to use its RTP services to power EWA in the near future, and it is not the only one.
Even, a financial wellness app that also provides EWA services through employers is negotiating with a large, undisclosed bank to facilitate its Instapay EWA service through the RTP network, said Jon Schlossberg, co-founder and executive chairman of the fintech based in Oakland, California. .
“RTP is a new trend for EWA, and it allows us to provide instant cash flow to people living paycheck to paycheck,” he said.
Schlossberg has visibility into the financial habits of low-income workers through its connection to Walmart, which allows Even employees to manage their money. Walmart is expanding EWA services to workers through PayActiv, based in San Jose, California.
Even, which was launched in 2014, expanded to EWA services in 2017, thanks to a model where employers cover all costs for employees who withdraw their wages early.
DailyPay, on the other hand, charges $ 2.99 for immediate EWA funds transfers and $ 1.99 for next day’s EWA funds.
More than a dozen companies operate in the EWA arena, which continues to gain momentum among venture capitalists.
New York-based Clair raised $ 15 million this month in a Series A funding round led by Thrive Capital, bringing its total funding to $ 19.5 million.
But the burgeoning niche still lacks a formal regulatory structure, and rapidly changing competition could dampen prospects for the latest startups, according to some longtime EWA vendors.
Ceridian, a Minneapolis-based human resources software provider with a large base of businesses using its payroll services, added real-time salary access for employees last year through a prepaid card connected to the app. Ceridian Dayforce mobile.
Since Ceridian was already doing attendance and payroll calculations for many employers, the company could easily provide up-to-the-minute pay to workers who request it, along with a full tax statement and of revenue, said Seth Roth, director of Dayforce.
Roth predicts that regulations will tighten in the EWA arena to ensure fee transparency and easy access to payroll information.
“The CFBP has created some metrics for EWA providers, but its guidance has not been finalized and clouds are hanging over the EWA niche, especially around the incredibly complex task of calculating taxes for EWA providers. concert workers in different jurisdictions. If rules appear around this can prove to be a challenge for many EWA startups, ”said Roth.