PayActiv Joins ADP to Offer Payday Loan Alternative | Payments Source
PayActiv’s membership in the human capital management firm ADP Marketplace to give it more volume as a payday loan alternative.
Safwan Shah, founder and chief executive of PayActiv, said his business was not in the lending business but with the aim of providing consumers with access to the wages they earned but have not yet been paid. He added that “what we do is provide timely access to their earned wages. It is not a loan since it has been earned. It’s timely because it’s when they need it, when their bills are due.
While much of the press has been made to provide faster access to payments for Uber and Lyft drivers, as well as workers in the odd-job economy, there is an underserved community of millions of Americans who work low-wage jobs and live off paychecks. These consumers often fall into the cycle of the debt trap payday loan, which is the subject of heated debate on Capitol Hill.
PayActiv, the Silicon Valley startup specializing in helping low- and middle-income workers access their earned wages earlier, has started ramping up its business with recent partnerships that include Walmart in December 2017 and now ADP.
Joining ADP Marketplace allows PayActiv to potentially reach over 600,000 employers representing over 26 million employees. According to PayActiv’s website, his first client went live in 2014. Since then he has grown his business considerably. Shah said that PayActiv “has nearly half a million users among several hundred employers who have registered as customers across the United States.”
PayActiv’s Walmart deal is a Partnership with another fintech startup, Even Responsible Finance Inc., which provides a personal finance app. In the deal, Walmart will allow its 1.5 million associates access to wages earned before scheduled paychecks so they can avoid being late in payment or worse, having to use paychecks. payday lenders. As part of the deal, employees will be able to receive eight free uses of the Instapay tool through the Even app, which is linked to an employee’s checking or prepaid account and the Walmart payroll system. Additional use, beyond the eight free, is the employee’s responsibility.
For most businesses, access is provided for a flat fee of $ 5 per pay period when used, what the company calls a membership fee. This allows a consumer to access up to 50% of the earned take home pay with a limit of $ 500. “All of these are configurable by the employer,” Shah said.
The costs can be paid by the employee or the employer or be subsidized as in the case Goodwill from Silicon Valley which pays half the fee or in the case of Walmart which offers eight free withdrawals per year.
“Once [the workers] use it, they change their pay schedule, ”and active users will typically access it 10 to 20 times a year because they have the flexibility, Shah said. The funds are sent to a consumer’s linked account through ACH because it is a profitable network, he said.
In an effort to continually evolve with its customers, the company has added a free bill payment feature. He is working with ACI to provide this capability, Shah said.
He said the biggest benefit for employers in providing earlier access to earned wages is that it improves with recruiting, reduces staff turnover and generates more engagement with employees. It “makes employees feel like the company cares about them,” Shah said. “Showing empathy can go a long way in building a positive relationship with staff.