On-demand pay for workers: reducing financial stress

Fintech paying workers on time

On-demand pay for workers can reduce financial stress and improve workers’ lives 👇

Why do employees have to wait until the end of the month to be paid? Why not pay employees in advance from say a continuous stream or on-demand?

It might surprise you, but more startups are offering on-demand pay, flexible earned wage access (FEWA) and salary on-demand. On-demand pay for workers provides an alternative to payday lending, overdrafts, and credit cards, which all carry higher fees – and it could be a solution to combat financial stressors on employees.

Trends like less full-time employment, diminishing living wage growth, stagnating saving rates and increasing household debt, are creating more financial distress for workers. Living “paycheck to paycheck” with no cash for emergencies and staying afloat with the financial stress of the COVID-19 pandemic also hasn’t helped, especially in the US and UK.

This has serious consequences for employers, as 20% of turnover is caused by financial stress and 56% of employees identify having to pay expenses before receiving their salary contributing to their financial difficulties.

However, there is a silver lining. Investor interest in on-demand pay startups and scale-ups seems to have picked up in 2021, with $443M invested globally and 2022 kicked off strong with already $355M raised.

Some on-demand pay startups and scaleups are achieving notable milestones within their market: US-based Dave has gone public at a $4B valuation and London’s Wagestream raised yesterday $175M in Series C funding.

On Dealroom.co, we’ve mapped 60+ companies offering on-demand pay. Discover more.👇

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On-demand pay and earned wage access (EWA) startups and companies

Financial stress for workers


The EY survey of US and UK workers shows the importance of flexible salary solutions, such as on-demand pay.
According to the survey, in the US:

  • 72% of Americans rank money as their 1st stress factor
  • 6 out of 10 do not have $500 at hand for emergencies
  • Americans pay more than $30B in overdraft fees every year.
Consequences of financial stress on workers
Source: EY Employee Financial Wellbeing Survey, June 2020

In the UK the situation is not as bad but has some similarities with 55% of households with less than £250 in savings.
Also,  56% identified having to pay expenses before receiving the salary as a factor behind financial difficulties. Financial stress is also the cause of 20% of employee turnover costing $300B every year to US and UK companies.
This worrying situation has been historically less heavy in Europe but also there we start to see more workers who live “at the day” and four macro trends are increasing their numbers:

  • more part-time employment
  • diminishing real wage growth
  • stagnating saving rates
  • increasing household debt

Furthermore, the pandemic has brought many more people to precarious financial conditions.
Fintech startups offering on-demand pay, flexible earned wage access (FEWA) and salary on-demand can help cope with and improve these stressful conditions.

Companies’ adoption and the shadow of pay-day lenders


On-demand pay for workers finds its place in a broader trend towards wider financial wellness responsibility for employers.
As reported by Sifted, however, adoption from companies is not easy.
Many are sceptical due to the bad legacy of payday lending, such as Wonga and others in the past which charged rates as high as 5,000% in some cases or do not want to interfere in employees’ finances.

The step from ethically helping financial distress workers to exploiting them is very small.

The new players in the sector “are presenting themselves as something different from the dodgy lenders of the past, when they’re all just wolves in sheep’s clothing” (Scott Miller).
Hidden fees (such as “tips”) and unsustainable interest rates (such as charging high flat fees) are some of the warning signs.

The case of Beforepay is emblematic.
The company debuted on the Australian stock exchange on January 17th and the company’s market cap has already shrunk by 71%.
Beforepay’s short term loans have an effective interest rate of 65% (17.17% more than getting a credit card cash advance) and 30% of all Beforepay loans were either written off or stopped performing in the past financial year. Basically, they are lending at predatory rates and few checks about the person’s ability to repay the loan.

The fall of pay-day lender Beforepay

But then which companies are doing things the right way?

Ethical-first on-demand pay for workers: Wagestream

London-based Wagestream is one of the main startups in the sector and just raised a $175M Series C ($60 equity and $115M debt) in what it claims to be the largest “fintech-for-good” fundraise.
Wagestream social mission is “to reduce the poverty premium and improve financial well-being for frontline workers” and is backed by leading UK-based financial charities such as Joseph Rowntree Foundation, Fair by Design, Big Society Capital, Social Tech Trust and Barrow Cadbury Trust and Village Global, the social impact VC backed by the likes of Jeff Bezos and Bill Gates.

Wagestream does not simply offer on-demand pay/earned wage access (EWA), but also allows employees to:

  • set up savings goals and then automate money from their paycheque into these ‘buckets’
  • put employees in touch with free, 1:1 financial coaching within the app
  • access personalised education.

It has already provided these services to more than 1 million workers by partnering with 300+ companies globally. The company is active in the US, UK, Spain and Australia. The strongest growth has come from the US where it serves 250.000 retail, hospitality and healthcare workers.
Partnership of on-demand pay for workers startup Wagestream

Wagestream is looking to build a financial super app specifically for waged workers and their financial well-being. And is now looking to snap up other smaller fintechs in the UK and beyond, to enable its product’s super app ambitions. 

Other main players in the on-demand pay for workers sector

On-demand pay and earned wage access (EWA) startups and companiesUS companies like DailyPay, Earnin have been early movers offering earned wages since 2012, but the market is evolving fastly.

Even Responsible Finance has been acquired by Walmart’s FinTech venture Hazel in its strategy to build a financial super app.

Several challenger banks now offer on-demand pay such as Dave which has gone public in January at a $4B valuation with a SPAC merger.

Refyne has brought earned wage access (EWA) to the Indian market and raised $102M since launching less than 2 years ago.

Also UK-based Hi, has partnered with Mastercard to launch a market-first salary access card last April, enabling people to access their pay as soon as they’ve earned it. Hi is backed by the IT giant NTT Data.

Flexible salary earning is an important, yet one of many bricks companies can offer to increase their employees’ financial wellness. We will explore many others, keep up to date 👇

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Additional resources:

On-Demand Pay: payroll that works for all – EY
Financial Inclusion Action Plan – Wagestream