24% of Banks Plan to Offer Businesses Early Wage Access Programs

Companies are looking for ways to attract and retain employees and are finding that early wage access is an offering that will help them do so.

As a result, the banks that serve these business clients are adding that feature to the range of tools they can supply.

In fact, 24% of banks intend to offer early wage access program soon, joining the 70% that already do so, according to “The Rise of Digital And Early Access Compensation,” a PYMNTS and Ingo Money collaboration that is the latest addition to the “Money Mobility Tracker® Series.”

Improving Employees’ Financial Well-Being

This strong and growing adoption of early wage access by banks is being driven by employers who are looking to reduce workforce attrition at a time when three-quarters of employees say they are looking to change jobs.

Early wage access has proven to be a valuable offering for these employers because consumers are looking to improve their financial health while they are living paycheck to paycheck and are being buffeted by inflation.

Three-quarters of consumers are already living paycheck to paycheck, more than half say their pay is not keeping pace with inflation, and 1 in 4 say they would have a hard time meeting their obligations if their paycheck were delayed.

In this challenging economic environment, 76% of consumers who are under stress say they would switch to an employer who showed concern for their financial well-being.

Boosting Employers’ Retention Rates

Early wage access is one way for employers to do so. In fact, recent studies have found that as many as 60% of American workers want to be able to access their wages as they earn them, rather than on a fixed, future pay day.

“We are all fighting to increase the retention rate, because you want people to stick longer on their work — definitely if they’re good employees,” Papaya Global CEO Eynat Guez said in a recent chat with PYMNTS. “So you have the opportunity here to transition this to a very, very good advantage,” she added, while cautioning that local and national tax laws and other payroll and benefit regulations are a point of friction that needs to be addressed.

Another use case for early wage access programs is instant tip payouts, which help restaurants with the recruitment and retention problems they’re facing.

Tips can represent 60% of restaurant workers’ income, yet many restaurants disburse the tips in their regular payroll cycle, Ingo Money CEO Drew Edwards told PYMNTS in a recent interview included in the report.

Rather than postponing employees’ access to such a large share of their income, restaurants can offer instant tip payouts and thereby boost their own standing in a competitive labor market.

“This is a beautiful example of where … cloud-based technology and payments can come together and help those independents and large operators compete in an ever-challenging labor environment, giving them … best-in-class functionality [regardless of the size of the operator],” Edwards said.

By providing solutions that create a win-win situation for both employers and employees, banks can improve their own customer acquisition and retention.