3 Investors Explain Why Earned Wage Access Startups Are Ready to Cash More Checks – TechCrunch

He always feels good to get paid, so it’s no surprise that a payroll model like Earned Wage Access (EWA), which allows employees to withdraw their accrued salary at any time, has exploded in popularity.

The pandemic has certainly played a big role in helping people understand the benefits of being able to treat their accrued wages like a small bank account. Although payday advances and payday loans have been around for much longer, they serve a very different purpose. With EWA, since you only have access to the money you have already earned, there is no risk of accumulating debt and workers can better manage their finances.

The potential of this model is enormous, but the industry is still in its infancy. Several countries do not yet have an EWA provider, and in most others providers are still taking their first steps.

Jennifer Ho, a partner at Integra Partners, is confident that the EWA industry will continue to grow after the start of positive interest. “In 2021, over $1.13 billion raised by startups offering EWA products. Due to changing lifestyles, rising cost of living and the residual impact of COVID-19, many small and medium businesses have become dependent on EWA,” she said. declared.

This does not mean that there are no problems. Most EWA vendors are still experimenting to find out what works, and business models vary widely, which is a symptom of an industry trying to find its footing. Two of the most important models involve either charging the employer a fixed fee or charging employees per transaction.

Aris Xenofontos, partner at Seaya, believes an employer-paid model is the way to go for two reasons: social impact and long-term sustainability. “From a social impact perspective, would you want the party that needs the money the most, the employee, to pay for the services? And from a long-term sustainability perspective, offering the service for free to employees helps drive better adoption — often 2-3x the adoption you get when employees pay per transaction,” he said.

“EWA companies are typically B2B2C companies and face the same challenges that many B2B2C companies face: the decision maker and the consumer have different incentives and priorities.” Jennifer Ho, Partner, Integra Partners

“Given that the pure EWA business model is not one of the strongest in the fintech world, choosing the model that contributes to better adoption leads to more cross-selling opportunities and ultimately to a better economy.”

To get a deeper insight into the state of the EWA industry, how it should be ranked, and where the money is going, we spoke to a few active investors in the space:


EWA is already prevalent in the US in industries such as retail and fast food, so how difficult will it be for startups to bring the technology to new industries? Which sectors are the most mature, and which offer the most resistance?

Jennifer: EWA works in all industries where salaries are not paid instantly, and it works best when they can serve large pools of financially underserved employees. The less savings people have to fund their daily lives before payroll is paid, the more valuable EWA becomes.

In developed markets, this typically means industries that have a large blue-collar workforce. However, in emerging markets like Southeast Asia, where financial literacy remains relatively low and large segments of the middle class remain financially underserved, EWA can have a much wider impact.

Aris: We have recently observed EWA penetration in two dimensions: vertical and horizontal.

From a vertical perspective, retail and fast food are indeed some of the first ones that come to mind, but other sectors are also seeing increasing penetration. Especially those where the workforce is dominated by blue collar workers, such as manufacturing and transportation.

From a horizontal perspective, we see EWA penetrating almost every industry at the lower level of compensation/entry level employees. These are sectors where the proportion of full-time permanent employees is high.

We believe the cost of living crisis that began in 2022 and is likely to last for some time is likely to drive this horizontal penetration.

Aditi: The best way to deploy the EWA in new industries is to distribute it through payroll vendors. One sector where EWA is viewed favorably is the nursing/medical industry.

Access to Earned Wages is still a relatively new service, and we are seeing several models, some billing employers and some billing employees. Which earned wage access model is the strongest? Why?

Jennifer: From a financial inclusion perspective, models where the employer – rather than the employee – bears the cost have the strongest social impact case. What we’ve found is that EWA startups typically serve a mix of customers in both models, where the employer pays in some cases and the employee pays in others.

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