The past year has been inundated with news about funding rounds and product launches related to Earned Wage Access (EWA) in what seems to have become one of the hottest topics in the fintech world in this moment.
EWA, also known as First Pay Day, is a financial service offered to employees, primarily low-wage and hourly workers, allowing them to access their accrued wages before the end of their pay cycle.
These solutions target people who are struggling to make ends meet between paychecks, offering them an alternative to payday loans that have been widely criticized as predatory for charging excessive interest rates and pushing borrowers into debt traps.
Over the past few years, fintech startups have emerged to challenge payday lenders. Some of these startups partner with employers and integrate with their payroll system to provide users with the money they’ve earned working for the company. Others don’t work for employers at all and instead request access to a user’s bank account to determine if and how much it makes sense to advance the user money.
The business concept has also aroused the interest of investors. In 2021, seven startups offering EWA products raised US$1.13 billion in debt and equity, surpassing total funding raised from 2015 to 2020, according to PitchBook data.
The broader financial ecosystem has also followed the trend, with companies across all industry sectors following suit.
Last year, digital bank Revolut launched its own EWA offering, called On Demand Pay. This feature gives employees instant access to a portion of their salary as they earn it.
In April 2021, Mastercard announced a partnership with UK-based payroll platform provider Hi55 to launch a market-first pay access card, allowing people to access their pay as soon as they won it.
In the United States, prepaid debit card provider Netspend launched its EWA platform and mobile app in September 2021, allowing companies to offer their employees on-demand access to accrued salaries.
And CloudPay, a UK company specializing in employee compensation solutions, in July 2021 launched CloudPay NOW, its own EWA solution, enabling multinational organizations to offer EWA before payday via a global technology solution.
In 2022, the momentum continues with the trend which is now accelerating in Asia, as evidenced by recent fundraising from startups in the sector:
- Refyne, India’s first EWA platform, closed an $82m funding round in January to grow, expand into different geographies, develop more products, build product awareness and hire more people;
- Wagely, an Indonesian EWA provider, raised $8.3m in a pre-Series A funding round earlier this month to fuel its expansion into Bangladesh, where it recently launched, and built other features to become a “holistic financial wellness platform”, including savings, insurance, long-term loans, and financial education;
- Paywatch, an EWA startup operating in South Korea and Malaysia, has raised US$5.3 million in seed funding which it plans to use to expand into new markets in South Asia – East, including Indonesia and the Philippines; and
- GetPaid, an EWA startup from Singapore, closed a $1.15 million funding round in January to develop and expand its EWA product across Southeast Asia.
Last year, Israeli fintech startup PayKey announced the availability of its white-label solution in the Philippine market. PayKey plans to work with local banks to offer its technology and said it has been in “advanced talks with some leading banks” in the country.
In Indonesia, where access to affordable and efficient financial services remains an issue for small businesses, enterprise-focused fintech service provider KoinWorks closed a $108 million Series C funding round in January 2022 to expand its range of digital financial services to small and medium enterprises. medium-sized enterprises (SMEs), which includes business accounts, credit cards, working capital, invoicing, factoring, cash management and EWA.