Employee Clout and Improved Technology Are Propping Up the On-Demand Pay Market
Workers want to get their pay as soon as possible. That's nothing new and should surprise no one. Yet few businesses have felt a need to speed up the payroll process. Until now.
The same class of technology that allows online retailers to suggest products based on customers' preferences and deliver them the very next day has led to a growing expectation that all companies should operate faster and in a more personalized way. As banking evolved from tellers to ATMs to digital payments, it became inevitable that workers would also come to demand to exert more influence over how their wages are dispersed.
That demand has led to the development of on-demand pay — also known as earned wage access (EWA). As a product type, it’s just about a decade old; at least that’s according to Payactiv, which claims to have invented the approach. But over the past few years, the number of EWA providers has grown exponentially.
The Growing Earned Wage Access Market
One industry analyst estimates that in 2020, users conducted nearly 55.8 million EWA transactions, worth $9.5 billion. That number was up from 37.2 million transactions, worth $6.3 billion, just one year prior — and up from 18.6 million transactions, worth $3.2 billion, the year before that. That's a 200% jump in just two years.
And it is likely the past two years once again exceeded those figures, as the popularity of on-demand pay among workers grew even more.
The 2022 Getting Paid in America Survey, conducted annually by the American Payroll Association, found some 60% of workers now want daily access to their earned wages, and 81% of those with household incomes of $100,000 or more feel they the same, according to another survey, this time by Ceridian.
The Ceridian study, which was conducted in 2021, also found about 78% of U.S. workers said that no-cost access to on-demand pay would increase their loyalty to their employer. Of the same group, 79% said it would make them feel more valued as an employee.
Adding to the argument, approximately 95% of employers believe employee financial wellness impacts productivity, according to ADP. A separate study by Bank of America found more than 84% believe offering financial wellness tools helps employee retention.
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Employees and Pay-on-Demand
Pay-on-demand allows companies to provide employees with access to earned wages before their scheduled pay date. Employees who enroll can have funds deposited into their bank account, onto a debit card or into a mobile wallet.
By adding real-time payments and pay on demand to their lineup, HR technology vendors help employers meet the growing demand for more flexible compensation arrangements, a valuable thing when the labor market is as unsettled as it is today.
Economic uncertainty and the rising cost of living have made these features more appealing to people. Ceridian, for one, believes they’ll attract candidates to the companies that offer them, especially as employees seek to take back control of their financial wellbeing.
This is particularly true of new generations. In its study, Ceridian found that 83% of U.S. workers between the ages of 18 and 44 want access to their earned wages at the end of each day or shift, and 78% of them said free access to on-demand pay would increase their loyalty to their employer.
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“In a world where almost anything can be accessed instantly, the current model of two- to- four-week pay cycles is outdated,” said Seth Ross, Ceridian’s general manager of Dayforce Wallet and consumer services.
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In 2021, DailyPay added capabilities that allow HCM technology, time management and payroll vendors to offer on-demand pay services through their product suites.
Jeanniey Walden, DailyPay’s global chief innovation and marketing officer, called ExtendPX, the new product, more than a simple integration. Through an open API, ExtendPX supports the full range of capabilities necessary to offer a full set of pay-on-demand services, which can be customized according each customer’s needs. It's “integration plus technology and support services,” Walden said.
In its launch release, the company stated ExtendPX will help HR technology vendors address what it expects will be triple-digit growth in customer demand. According to Walden, the company had already received numerous requests from a number of its partners to facilitate on-demand pay solutions, and it has been partnering with key HCM and TMS companies over the past five years to develop these new capabilities.
What this all means is that EWA products are knitting themselves into the employer’s technology stack. That should come as no surprise to anyone in the field. Pay on demand products, whether standalone or integrated, satisfy growing demand by employees, boost retention and strengthen the employer brand.
It’s hard to predict where EWA will go in 2023, but with pressure on employers continuing to increase, it’s reasonable to expect the use of EWA will rise as well.
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