1. History

2. Earned Wage Access

3. Business Model

4. Impact

5. References

PayActiv solution, Timely Earned Wage Access, is supported by behavioral economics research “workers who make less – and therefore have less of a savings buffer with which to smooth consumption – should be paid more frequently.”^[4] If pay were correlated to consumption, workers would be better equipped to meet their financial goals, without relying on borrowing or saving. Research has also shown that payday loans, as currently constructed are “payday loans act as revolving debt and encourage lifelong indebtedness.”^[4] By providing timely access to earned wages to deal with short-term small-dollar financial shocks, PayActiv helps low-wage workers escape high-cost lending traps and materially improves their financial resiliency and health.^[5]

The solution is offered as a financial wellness benefit by employers to their employees. A workforce that is not under stress generates financial benefits to employers because an effective financial wellness solution leads to better recruitment, improved, engagement, and lower turnover. The Power of the Salary Link paper published by Harvard Kennedy School Mossavar-Rahmani Center found that “If we apply the PayActiv reduced the turnover rate to our simplified Target attrition model, we would anticipate annual cost savings of ~$110 million per year.”^[5]

History

Safwan Shah conceived the idea of timely access to earned wages in 2012 as a solution to between paychecks financial stress faced by millions of Americans living paycheck to paycheck. It took him along with co-founders Sohail Aslam and Ijaz Anwar a year and a half to break through the regulatory barriers and conventional wisdom to build the technology and financial framework required to create the first-of-its-kind financial service that delivers on-demand, real-time access to earned wages. Trials began in August 2013 and the first customer, Jersey Precast Construction, went live in September 2013, followed by Gills Onion in December 2013, and Goodwill of Silicon Valley in early 2014.

In June 2014 PayActiv raised $4.3M in funding.^[6] In November 2015 it was certified as a B Corp.^[7]

On February 18th, 2016, PayActiv announced Series A equity funding of $9.2M led by Softbank Capital^[8]

On May 13th, 2016, PayActiv was awarded the Best of FinTech Show at Finovate.^[9] Also, September 19th, HR Executive awarded PayActiv the Top HR Product of 2016 award.^[10]

On December 13th, 2017, Walmart, the largest private employer in the world announced financial wellness services powered by PayActiv Earned Wage Access for their 1.4 million associates.^[11]

May 2018, Harvard Kennedy School working paper based on data from 16 customers of PayActiv is published showing how salary link model of PayActiv Earned Wage Access lowers employee turnover by 19% and employees save on average $30 and avoid a bank overdraft or a late payment.^[12]

July 2018, over 600,000 employers representing approximately 26 million employees, have the ability to offer PayActiv Earned Wage Access as a financial wellness service to their employees.^[13]

Earned Wage Access

Over $100 billion are earned by the end of every week but remains unpaid; this money is stuck in the system waiting to get disbursed on payday while millions of workers are juggling expenses and paying penalties like late fees, overdraft fees, loan fees, and interest.^[14]

Waiting two weeks to get paid may not seem very difficult if one has savings, insurance protections, assets or investments that they can use in case of emergencies. However, for an estimated 90 million Americans having less than $400 in savings, the primary means of liquidity is their paycheck.^[15] Any volatility in the flow of expenses between paychecks becomes a source of severe stress. ^[16]

In 2013, PayActiv created a financial technology solution enabling workers to access their earned but not yet paid wages instantly when they need it from the security of their mobile phone. In the background, to deliver timely earned wage access, PayActiv uses time and attendance data from the employer to calculate the available funds and the payroll system format to provide a deduction file to be reimbursed for the accessed funds.

Employers partner with PayActiv and offer it as voluntary financial wellness benefit to their employees. Employees download a mobile app and enroll. The app has configurable rules acting as guardrails for the employee – members can access a portion of their earned funds between paychecks. In the subsequent paycheck, the already accessed amount appears as a deduction/adjustment. There is no change in the employer payroll process or the employee banking relationship.

Business Model

Businesses offer PayActiv to their employees as a voluntary financial wellness benefit. All employees are eligible to use the services irrespective of their employment status (part time, full time, exempt, non-exempt), banking status (banked, unbanked, underbanked), or their credit history because PayActiv is not a credit solution and there is no underwriting involved. A typical user pays a flat, nominal ATM-like fee only if services are accessed which includes earned wage access and a growing ecosystem of financially responsible products. This fee is often subsidized by employers because of the many benefits of a workforce that is not in financial stress.

Impact

Based on CFSI data on ‘annual spend on alternative financial services like bank overdrafts, payday loans, later fees.' ^[17] an average PayActiv user saves $150 per month by avoiding costly alternatives. PayActiv calls these costs of alternate financing a Fin-Tax ^[18] or a regressive tax on the poor which is eradicated by their products and services.

References

• Israel –Nigeria relations
• Israel – Nigeria relations
• Israel – Niger relations
• Israel – North Korea relations
• Israel – Norway relations
• Israel–Oman relations
• Israel – Pakistan relations
• Israel – Palau relations
• Israel – Palestine Liberation Organization letters of recognition
• Israel–Palestine relations
• Israel–Palestinian peace process
• Israel–Papua New Guinea relations
• Israel – Peru relations
• Israel – Poland relations
• Israel – Qatar relations
• Israel – Republic of Macedonia relations
• Israel – Russia relations
• Israel–Saudi Arabia relations
• Israel – Saudi Arabia relations
• Israel – Serbia relations
• Israel – Singapore relations
• Israel–South Africa
• Israel–South Africa Agreement
• Israel – South Africa relations
• Israel – South Korea relations