It is very easy for many who are new to the fintech space to think that financial technology is an exclusive term for payments technology, and while there is some truth to this, it does not tell the entire story about fintech. However, in June, The Fintech Times is looking to indulge this belief as we look to discuss hot topics surrounding both sending and receiving payments, like buy now pay later (BNPL), early paydays and much more.
Our paytech focus now moves on to salary access improvements. We kick off this focus by understanding how people are getting paid, and what technology is doing to make this process as seamless as possible.
Faster access to payroll funds
Phillip McGriskin, CEO at Vitesse, said “In today’s world, the nature of work is evolving. As employees seek greater flexibility as to where they work and how they receive their paycheck, technology is making it easier for employers to attract and retain workers, by offering faster access to payroll funds, while reducing organisational costs.
“Fortunately, new innovations in payments technology can improve the efficiency of making payroll payments, particularly for global enterprises, allowing employers to more easily accommodate innovations in payroll while reducing costs for the organisation.”
Neobanks offer an alternative for the unbanked
Charles Rosenblatt, president, banking as a service at PayQuicker, said, “The way people get paid is evolving. Full-time W-2 employees continue to get paid through the old stand-by of payments into their bank accounts from the ADP and Paychex of the world. Neobanks emerged to solve the challenges faced by the unbanked, offering new alternatives to physical check and check-cashers. And for 1099 workers, there are now a range of options as well. They can get paid instantly onto cards through fintech providers, via e-wallets, crypto and of course, traditional bank accounts.”
Faster payments can improve trust between employer and employee
Ian Wheeler, CEO, Income Group, said, “The current payroll payment process is controlled by legacy practices, locked pay cycles, and lacking the flexibility to meet the needs of today’s workforce.
“In a recent survey conducted by Income Group alongside the Chartered Institute of Payroll Professionals (CIPP) we discovered that 85 per cent of all business payments are processed via Bacs. However, three out of five professionals use faster payments in some capacity. This can be paying suppliers or making one-off payments, but most of payroll is still paid via Bacs.
“Payroll is one of the most critical payments a business makes – trust between employer and employee is paramount. 57 per cent of payroll professionals attribute not using faster payments to a lack of visibility in the market – they just don’t know faster payments can be used for payroll – which it can.”
Instant payments can lead to employee stress relief
Grzegorz Kosiński, senior innovation consultant, Netguru, said, “The instant payment of salaries could become the newest trend in employer benefits. Apparently, 83 per cent of Americans would like to receive their salary on a daily basis, at the end of the workday. To address this gap, there are companies that offer instant payout services (Daily Pay, Dayforce Wallet).
“On one hand, instant payments should allow employees to cover some unexpected bills; on the other hand, it could create a habit of making unplanned spending due to instant access to money. It certainly won’t help in creating money-saving patterns. While the solution has its pros and cons from the employee standpoint, for companies, it creates another layer of financial complexity. It would impact financial processes such as planning and cash availability.
“However, this solution could be beneficial for low-paid jobs, where instant access to resources can provide much-needed flexibility and stress relief. The same rationale can be applied to temporary jobs. In both cases, offering an instant pay-out option to employees could lead to increased loyalty and higher motivation.
“Last but not least, we must remember that using those opportunities will lead to some costs that must be covered either by the employee or the employer.”