Many fintechs specialize in giving workers some or all of their earnings ahead of the traditional two-week pay cycle, but DailyPay is using real-time payments as a differentiator. DailyPay recently became the first to add the feature via partnership with PNC Bank and The Clearing House’s RTP network.
While most providers use push-to-debit options that deliver funds in near-real time, RTP isn't a night-and-day difference. But leveraging the RTP network adds a few perks that could expand banks’ participation in earned wage access, or EWA.
The RTP network provides immediate confirmation that EWA funds were successfully delivered, which is critical for employees dodging late fees by paying bills at the last minute, according to Chris Ward, executive vice president and head of digital and innovation for PNC Treasury Management.
“Speed and certainty are the two most important aspects of payments for workers with precarious finances, and early wage access is a great use case for RTP,” Ward said. "In push to debit, you get notice of authorization, but there are nuances that are not absolute confirmation like you get with RTP."
New data sheds more light on why timing is critical for EWA users.
In a survey Arizent conducted during the first quarter of this year among 494 U.S. adults who had used an EWA service, 77% of respondents said they opted to receive funds instantly or on the same day.
About a third (33%) of EWA users with under $50,000 in household income first used EWA for rent payments, while 31% of EWA users with up to $99,000 in household income used the service to pay an unexpected bill.
As more Zelle transactions begin to move over the RTP network, Ward sees other ways for the faster-payments option to benefit EWA operations.
“In the future, an employee signing up for DailyPay would only need to provide their Zelle ID — typically a mobile phone number — to take friction out of the onboarding process by not having to enter all their personal and account information,” Ward said.
Earlier this year PNC Bank, along with Bank of America, were the first to announce plans to clear Zelle transactions over the RTP network.
PNC says it’s in talks with other companies planning to use its RTP services to power EWA in the near future, and it’s not alone.
Even, a financial wellness app that also provides EWA services via employers, is negotiating with an undisclosed large bank to facilitate its Instapay EWA service via the RTP network, said Jon Schlossberg, co-founder and executive chairman at the Oakland, California-based fintech.
“RTP is a new trend for EWA, and it allows us to provide instant liquidity for people living paycheck to paycheck,” he said.
Schlossberg has visibility into lower-income workers' financial habits through its connection to Walmart, which offers Even to employees to manage their money. Walmart extends EWA services to workers via PayActiv, which is based in San Jose, California.
Even, which launched in 2014, branched into EWA services in 2017, through a model where employers cover any fees for employees withdrawing their wages early.
DailyPay, by contrast, charges $2.99 for immediate EWA funds-transfers, and $1.99 for next-day EWA funds.
More than a dozen companies operate in the EWA arena, which continues to gain steam from venture capital investors.
New York-based Clair this month raised $15 million in a Series A funding round led by Thrive Capital bringing its total funding to $19.5 million.
But the booming niche still lacks a formal regulatory structure, and rapidly evolving competition could dampen prospects for the latest startups, according to some longtime EWA providers.
Observers expect regulations to evolve in the EWA arena to guarantee transparency around fees and ease of access to payroll information.
