This past year has been flooded with news of funding rounds and product launches relating to earned wage access (EWA) in what appears to have become one of the hottest topics in the fintech world right now.
EWA, also referred to as early payday, is a financial service offered to employees, mostly low-wage and hourly workers, providing them access to their accrued wages before the end of their payroll cycle.
These solutions target people who have difficulties making ends meet between paychecks, providing them with an alternative to payday loans which have been widely criticized as predatory for charging excessive interest rates and pushing borrowers into debt traps.
Over the past few years, fintech startups have emerged to challenge payday lenders. Some of these startups partner with employers and integrate into their payroll system to provide users with money they’ve earned working for the company. Others don’t work for employers at all and instead ask for access to a user’s bank account to determine whether and how much money makes sense to advance to the user.
The business concept has been piquing investor interest as well. In 2021, seven startups offering EWA products raised US$1.13 billion in debt and equity, surpassing total funding collected from 2015 to 2020, according to PitchBook data.
Global VC deals in earned wage access, Source: PitchBook
The broader financial ecosystem has also caught up to the trend, with companies from all parts of the industry jumping on the bandwagon.
Last year, digital bank Revolut launched its own EWA offering, called On Demand Pay. The feature allows employees to instantly gain access to a portion of their salary as they earn it.
In April 2021, Mastercard announced a partnership with UK-based Hi55, the provider of a payroll platform, to launch a market-first salary access card, enabling people to access their pay as soon as they’ve earned it.
In the US, prepaid debit cards provider Netspend launched in September 2021 its EWA platform and mobile app, allowing businesses to offer their employees on-demand access to accrued wages.
And CloudPay, a UK company specializing in employee pay solutions, introduced in July 2021 CloudPay NOW, its own EWA solution, allowing multinational organizations to offer EWA in advance of payday through a global technology solution.
In 2022, the momentum continues with the trend now picking up steam in Asia, as evidenced by the recent rounds of fundraising that went into startups in the sector:
- Refyne, India’s first EWA platform, closed a US$82 million funding round in January to scale, expand into different geographies, develop more products, spread awareness about the product and hire more people;
- Wagely, an Indonesian EWA provider, raised US$8.3 million in a pre-Series A funding round earlier this month to fuel its expansion in Bangladesh, where it recently launched, and built other features to become a “holistic financial wellness platform,” including savings, insurance, long-term installment loans and financial education;
- Paywatch, an EWA startup operating in South Korea and Malaysia, raised US$5.3 million in seed funding which it plans to use to expand into new Southeast Asian markets, including Indonesia and the Philippines; and
- GetPaid, an EWA startup from Singapore, closed a US$1.15 million financing round in January to scale and expand its EWA product across Southeast Asia.
Last year, Israeli fintech startup PayKey announced the availability of its white-labeled solution in the Filipino market. PayKey plans to work with local banks to offer its technology and said it has been in “advanced talks with some leading banks” in the country.
In Indonesia, where access to affordable and effective financial services remains an issue for small companies, business-focused fintech services provider KoinWorks closed a US$108 million Series C funding round in January 2022 to scale its suite of digital financial services for small and medium-sized enterprises (SMEs), which includes business accounts, credit cards, working capital, invoicing factoring, treasury management and EWA.
