Embedded Finance
Europe Paytech Thought Leadership

Highnote: 3 Finance Innovations Businesses Can Use to Increase Value

Businesses are constantly looking for ways to get an edge over their competition, and in a world driven by a customer’s convenience, there has never been a more important time for businesses to provide the most up to date technology. 

John MacIlwaine, is the CEO and co-founder of Highnote, a modern card platform, purpose-built to grow customer loyalty, engagement, and revenue through embedded card issuance experiences.

MacIlwaine has over 20 years of experience in executive-level technology roles in the financial services industry, and prior to Highnote, he served as the general manager of Braintree (a subsidiary of PayPal) and as head of global development at Visa.

Speaking to The Fintech Times, MacIlwaine analyses three ways in which finance innovations can help increase the value of a business.

John MacIlwaine is the CEO and co-founder of Highnote
John MacIlwaine, CEO and co-founder of Highnote

Businesses today face a unique constellation of financial pressures: employees are quitting in record numbers, inflation is at 40-year highs, and there are signs a recession is imminent. To stay competitive, businesses need to find ways to add value – to employees and consumers alike – without increasing expenses.

Embedded finance offers several solutions.

Here, I’ll provide an overview of three finance innovations that can streamline workflows and improve employee retention.

#1: Support your employees by offering earned-wage access

Thirty-two percent of workers – even those earning six figures – run out of cash before payday.

So how do these workers cover the cost of their groceries and utilities? And what happens if they need to replace a tire or fix their washing machine? Traditional options – such as lines of credit or payday loans – can increase consumer debt, digging the financial hole even deeper.

But there’s a product that lets employers offer their employees access to money they’ve already earned: earned wage access (EWA).

In addition to preventing consumer debt, EWA helps strengthen the employer-employee relationship. In fact, companies that offer EWA can experience at least one-fifth less turnover than competitors that don’t.

EWA can also help companies build relationships with vendors. Through mutually beneficial initiatives such as branded cards, employers can work with retail partners to offer value to their business, their employees, and their vendors:

  • Vendors benefit because branded cards promote brand affinity and stickiness.
  • Employees benefit because EWA offers financial flexibility, and the branded card can include benefits such as reward points.
  • Employers benefit by bolstering their relationships with vendors and employees, reducing the turnover of both.

By setting fixed wage distribution intervals – say daily or semi-weekly – employers can assist their employees while still managing their company’s cash flow. And whether they offer EWA through direct deposit or a general-purpose reloadable card, employers can automate payments to streamline the system.

#2: Streamline accounting workflows by automating your ledger

EWA offers substantial benefits for employees and the employers who want to retain them. But without a fully digitised and automated back end, it could create a lot more work for the finance team tasked with processing all those payments. With an automated ledger, that additional burden is removed.

What’s more, an automated ledger system speeds up processing and limits opportunities for human error in all transactions.

That’s because the automated ledger handles posting and reconciliation automatically and in real-time, meaning your team only has to audit the ledger records and handle exceptions rather than reconcile each and every transaction.

For businesses that operate as multi-vendor marketplaces (e.g., Etsy), an automated ledger streamlines the processing of transactions that involve multiple vendors with varied terms (e.g., when a customer buys products from multiple sellers in a single purchase).

Regardless of business structure, though, automated ledgers can greatly reduce the amount of tedious work an accounting team has to do while improving its accuracy and speed.

#3: Enhance the impact of EWA and automated ledgers through real-time payments

In addition to earned wage access, automated ledgers facilitate another innovation that can ease financial stress: real-time payments.

Real-time payments offer the ability to send money between financial institutions and settle those transactions nearly instantaneously. This is as useful on the back end for tracking vendor transactions as it is on the front end for your employees.

And unlike other transaction methods that advertise their speed and convenience, such as crypto, real-time payments offer the safety of regulation.

Like earned wage access and automated ledgers, real-time payments are efficient.

Here’s how they work. Financial institutions establish direct communication channels with each other. When money needs to move between them – say you want to settle a vendor’s purchase order by sending funds from your account to theirs – RTP automates the process from authorisation to posting to settlement to notification.

In addition to its efficiency, RTP offers businesses the opportunity to accurately access their current account balances without holds or pending charges.

And with knowledge comes more knowledge. Understanding liquidity in real-time positions you to make informed choices about how and when to leverage available funds.

Innovative automation works for you and your people

Earned wage access, automated ledgers, and real-time payments offer unique opportunities for your company to build a bridge between the Great Resignation and the Great Return – and whatever market conditions come next. By streamlining back-end workflows, finance innovations like these lay the groundwork for the future innovations that will be necessary to adapt to changing conditions.

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