How payment companies hope to address the Great Resignation

April 5, 2022 11:21 AM

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Companies that don't pay employees when and how they want to get paid may find themselves short-handed at a time when entire national economies are searching for labor.

"The concept of waiting two weeks for a paycheck doesn't seem natural anymore," said Jim Filice, vice president and head of new payments at Visa in Toronto.

Visa in late March launched a product that allows DoorDash's Canadian drivers to get paid in near-real-time with compensation based on work accrual. This is just one in a series of developments from payment companies, banks and fintechs that are using real-time payments, digital assets, short-term merchant lending and automated expense reporting to expand relationships with business clients worried about finding — and keeping — workers.

"Wage flexibility has become a benefit just as much as medical or dental," Filice said.

The labor shortages are ongoing and international. More than 4.3 million workers in the U.S. voluntarily left their jobs in February, an increase of 94,000 from the prior month, according to U.S. Bureau of Labor Statistics published at the end of March. This figure represents a higher percentage of the workforce that resigned: 2.9% in February compared to 2.8% in January. There were 11.3 million job openings in the U.S., and 1.8 jobs for every unemployed person — stats that are all at or near record highs that have held steady for much of the past year.

There are similar pressures in Canada, where job openings have remained near record highs for several months, and the U.K. is reporting high job openings amid a declining population and, like the U.S. and Canada, a wave of resignations. Europe is also reporting labor shortages, though not as extensively as the U.S.

By streamlining or digitizing payroll, or making it possible to boost salaries, the following payment companies are trying to give employers an advantage over a competitor that does not offer as much flexibility.

Bloomberg

Visa

Visa's DoorDash collaboration, which was launched in Canada on March 23, allows drivers to receive payments and direct funds to a debit card or bank account as they log hours, rather than adhering to a regular pay schedule.

The product, called DoorDash Fast Pay, uses Stripe's Instant Payouts portal and Visa Direct to support real-time payments to contractors or freelancers. According to a Visa study, 89% of gig workers are likely to sign up for real-time payments, and 66% said they would select employers who offered real-time payouts over firms that do not. The DoorDash flexible wage product is focused on Canada and the U.S., and Visa has entered similar partnerships internationally with gig economy companies such as Instacart, Jobber and Lyft.

"These companies need to compete for contractors, who are starting to make short-term decisions on who they are going to work for," Filice said. "The companies need to provide value to those who are working for them."

Bloomberg

Mastercard

Mastercard offers a suite of products that accompany an earned wage access (EWA) offering that uses Mastercard Send as a transfer rail. Mastercard's research found 79% of workers would switch jobs for an employer who offered EWA, while 89% would be willing to work longer for an employer that offered such a service.

Mastercard's other "employee satisfaction" products include personal financial management via Finicity, the open banking data company Mastercard acquired in 2020. Mastercard has also worked with EWA provider Clair to offer white-label EWA services for employers, payroll companies and time and attendance providers.

Bloomberg

PNC

PNC in recent months has added both EWA and Request for Pay (RfP), two products that employers can use to ease financial stress for staff. EWA provides a portion of a worker's salary ahead of the regulatory scheduled payday, while Request for Pay uses the Clearing House's RTP rail to match billing with instant payment or payment at a scheduled time.

Both RfP and RTP are still in early stages of adoption among banks, and are emerging as a competitive play among financial institutions. PNC says the products can offer a competitive advantage for business clients when attracting staff.

EWA and RfP can address workers' liquidity and overdraft risk by matching available funds in an account to an expense. In an earlier interview, Chris Ward, executive vice president and head of digital and innovation for PNC's Treasury Management unit, said that in a tight labor market, "employers are going to look to create more connectivity to their employees."

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DailyPay, IntelyCare and ADP

EWA company DailyPay partnered with nurse placement platform IntelyCare and human resources firm ADP in late 2021 to provide flexible compensation for nurses. ADP also has a partnership with DailyPay.

The IntelyCare deployment resulted in a 300% increase in placements in the following seven months, according to IntelyCare, which refers to itself as an "Uber for nurses."

The pandemic has resulted in burnout and financial challenges for nurses, according to IntelyCare, which reports higher-than-normal openings for nurses but a shortage of available people to fill the roles. IntelyCare has used EWA to give nurses control over when they receive their wages in an employment environment in which the power dynamic between health care centers and nurses has shifted.

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Fiserv

The bank technology company in late 2021 entered the EWA market by integrating its products with Instant Financial, which underpins EWA disbursements.

That integration enables Fiserv's Money Network infrastructure to offer EWA through prepaid payroll cards at more than 4,000 employers.

Fiserv did not return a request for comment for this story, but has categorized the product as a way to remove "friction" out of payday and enabling workers to access wages when they need funds.

Both arguments are central to the general EWA strategy, which is to use the product to attract employees by offering ease of use.

"Everything is instant and payroll shouldn't be any different," said Visa's Filice.

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Thrive HR Consulting

Crypto has also made its way into staff recruitment.

Thrive HR Consulting has conducted research with business clients to determine differentiators for employers, and that includes digital assets — particularly for younger people.

Thrive, which advises companies such as financial institutions, hospitals, and technology vendors, recently added cryptocurrencies as a sign-on bonus for clients to offer. The crypto is sent to the prospective employee's digital wallet, with criteria to stay at the company. If the criteria is not met, the crypto can be repaid.

"Cryptocurrency is incredibly attractive to millennial candidates as their choice as a method of payment," said Jason Walker, co-founder of Thrive in Austin, Texas. "Those that have a passion around crypto see it as a way to improve the standards for people all over the world."

Bloomberg

Kabbage from American Express

The fintech lender and payment provider Kabbage is pushing lending to small businesses to fund higher salaries or bonuses to address worker shortages. Kabbage, which has rebranded as Kabbage from American Express following Amex's acquisition of the company in 2020, launched Kabbage Funding after the deal closed.

The product is aimed at a variety of business needs, though helping small businesses address worker shortages resulting from the Great Resignation is a primary use case. In a survey released March 30, Kabbage reports both inflation and staffing have become challenges for businesses, with businesses saying they have increased prices by an average of 21% over the past year to accommodate increased costs from vendors and raw materials.

Three quarters of small businesses say they are not yet hiring, and 59% report hiring is at least as difficult as it was at the end of 2021.

National Business Capital has added consulting on hiring and staffing to its core lending product for small businesses. The Bohemia, New York-based firm is also offering capital to help small businesses attract workers, and supplies businesses with information on upgrading employee benefits such as health care coverage, incentivizing top performers, and identifying the best ways to access government programs that provide help in hiring veterans and other underserved demographic groups.

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Mesh Payments

Payment technology companies are also upgrading corporate expense reporting and reimbursement policies to match an emerging mix of remote work and a return to business travel. These new products are seen as employee perks and recruitment tools that make it easier for people to mix their personal finance with work finance while avoiding cumbersome expense processes.

In partnership with Visa, Mesh Payments has launched a numberless business payment card that allows users to link virtual cards to physical corporate cards that can be customized. The virtual cards are meant to be a workaround for the common practice of business travelers using their own cards, then filing expense reports for later reimbursement.

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TripActions

TripActions recently launched an expense management product that uses artificial intelligence to automatically itemize receipts, then apply corporate policy to each item. The technology is designed to replace manual reporting by employees and vetting of individual items by an employer.

The use of AI is intended to improve the product's performance over time, and TripActions uses Plaid to route data between the bank accounts involved in business' employee travel or other expenses.