In a world built on capital exchange, money is vital to workers. In fact, it’s fair to say that financial reward is the main reason people turn up to work.
However, it seems that traditional methods of payment are becoming outdated. Many believe that a monthly paycheck doesn’t help employees in the way it should and instead earned wage access (EWA) should become commonplace.
EWA, sometimes known as salary advance, does what it says on the tin, it allows employees to use the wages they have already earned at a time of their choosing.
Payflow recently raised $9.1 million in a Series A round of funding, and Menardo provides commentary on why EWA is a necessity, and the future of his company as a neobank (an online bank without physical branches).
Why is EWA important?
Menardo explains that EWA has already become popular, and for many, there is no way back. He simply adds that there is no good reason for paying people monthly.
Menardo continues: “I think it’s it’s an idea that works very well, in the current context of well provide more than a salary to your employees.
“This actually got strengthened when you’re seeing the ‘Great Resignation‘ in the US where everyone is leaving because this is not a salary matter anymore.”
Thinking about the construct of a monthly paycheck, Menardo reasons that you were paid for what you delivered when you delivered it 200 years ago. He reasons that the growth of the gig economy is seeing us return to this exchange.
Despite highlighting the need and history of EWA, Menardo makes a clear distinction between loans and salary advances.
Menardo notes: “We see a lot of salaried advanced ventures that are charging employees, and we see a lot are trying to position as kind of social enterprises.
“If you’re charging employees for their own wage, and you’re not doing anything social, you’re doing a payday loan.”
Although Menardo states he has no issue with the idea of a payday loan, he states that it is not a market Payflow is interested in.
“Often when we go to see a client, and they say, ‘Hey, your competitors came to me and they’re doing something similar that is free for me.’ I don’t want to work with those clients.
“If this is how you’re going to treat your employees, making them pay for what they’ve worked for – I don’t want to work with people like that.”
Menardo clarifies: “We really want to create some strong links with the employees because we don’t want to have the employees see us as someone that is taking money from them. It’s really a service towards the company, and for the employee, it is purely to help them better manage their wages.”
On the back of this belief, Payflow offers financial education to its clients because “it’s just fundamentally good for the employees to understand better about how to how to manage your personal finances“.
Payflow similarly launched a savings feature to promote financial wellbeing. These features are not designed for profit but to ensure that EWA promotes a healthier and happier workforce.
Loans can also be dangerous for employees, and if they ultimately lose money, Menardo reasons that this does not service financial freedom.
Menardo explains his motivation: “My goal is that our children and grandchildren will completely forget that their parents were getting paid once a month.
“And for that, I need to remove old traction from businesses. So that’s why it just doesn’t work for people to be paying for their wages.”
Becoming a neobank
Discussing the future, we touch on Payflow’s plans to become a neobank. On the back of Menardo’s thoughts on loans, he offered his perspective: “If you look at ‘buy now pay later’, you look at neobanks, you look at most of the FinTech (even expanding management), most of these companies, they want to control a part of that value chain.
“With salary and events, you control the source. By controlling the source you can provide a much better service than everything else that doesn’t. [This is] because it goes through you, and then goes through the rest [other vendors and financial institutions]” enabling the company to become a central hub for transactions and ultimately a neobank.
He adds: “So if you’re good enough, people will start dropping services that are lower in the value chain.
“This is why this model is so powerful. And this is why this [the idea of a neobank] creates so much excitement. Because it’s an obvious evolution of the way money flows.”
With these big plans for the future and a focus on the employee, it’s time to start watching the salary-advance space.
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