Spanish FinTech Payflow has raised $21 million to expand its on-demand payment offering for employees.
“In the current context, this is more than great news, this is transformational for us and will allow us to grow 10x in Europe and Latin America,” Co-founder Benoit Menardo announced on a LinkedIn post Monday (Sept. 18).
“Having BBVA trust our model is a confirmation to our 60+ people team, 800+ clients and 500,000+ users that this is just the beginning,” Menardo wrote.
PYMNTS looked at the benefits of earned wage access (EWA) earlier this year in an interview with Rob Nardelli, director of commercial banking and business development at DailyPay, who said the method can help households avoid the high risk of payday lenders.
As that report noted, households that live paycheck to paycheck are subject to the same unanticipated expenses as their more financially secure counterparts, but lack the savings to pay these expenses without going into debt.
That’s birthed an entire cottage industry of predatory practices to profit from these households, with massive penalties that push them further into financial crisis.
“What are the alternatives for folks who don’t have the ability to cover that $400 emergency expense?” Nardelli asked. “They typically turn to two options. One is Larry Loan Shark, who charges you roughly 300% APR for the favor, and the other is bank overdraft fees.”
EWA gives paycheck-to-paycheck households an escape from the vicious circle presented by these high-risk options. By offering wages on a real-time basis, families have more protection from unexpected expenses.
“For 95% of Americans, the only options they have today would be to turn to those alternatives,” added Nardelli. “[EWA] represents a way for them not to have to take on debt. They’ve earned the hours and wages. EWA just gives them access.”
Meanwhile, PYMNTS intelligence has found that 75% of gig workers wish to be paid more often than every two weeks, while the same percentage of millennial consumers say instant payroll could affect their decision to accept a job offer.
“The age of the biweekly pay period seems to be drawing to a close, with workers increasingly demanding their wages as they earn them rather than waiting days or weeks before they can access their pay,” PYMNTS wrote in July. “Implementing earned wage access is a key way to improve employee loyalty, and it offers companies increased visibility into their cash on hand, helping to improve overall money mobility.”