While the past few years of living with COVID have changed nearly every aspect of life, the world of payments was one of the most dramatic transformations. Consumers have been been moving away from cash for years, but the pandemic accelerated this shift at a rapid pace. In fact, digital wallet use (payments made via an app like Apple Pay or Google Pay) rose by 23.7% from 2019 to 2020. Apple Pay is now in use on more than 500 million iPhones.
The move to fast, digital transactions has been natural for consumer behavior. But business payment methods—particularly how companies are paying their workers—haven’t caught up. Many places still rely on outdated payment methods like paper checks or paycards, leaving workers frustrated. The American workforce wants faster, more convenient ways of getting paid. And with the current labor shortage, businesses can’t afford to look the other way when it comes to these demands.
So what needs to be done to navigate the world of post-pandemic payments? Switching to cashless payments, taking essential worker demands seriously, and looking into the gig economy can all help us answer this question.
Cash Rules [Nothing] Around Me
It seemed inevitable that the paper money we’ve long understood to be inherently germ-ridden would be one of the first things to go during a global pandemic. Cash was only used for 20.5% of global POS transactions in 2020, which is a 32.1% decrease from 2019. Naturally, this meant fewer people tipped in cash, too, which led to a challenge for businesses.
Tips would come into a business digitally, via credit card, yet they’d have to tip out their workers in cash each night or place tips on their next paychecks. This created major cash flow problems, unnecessary trips to the bank, and hours lost to reconciling the till each night. We saw these challenges play out in restaurants and other businesses across the country. (Check out this case study to see how much time Pizza Hut franchises have saved by switching to digital tips, for example.)
Not only is this time-consuming for payroll and HR, but workers are no longer content with these sluggish payment methods, either. They want access to their wages faster, especially when it comes to things like tips or mileage reimbursement. They aren't content waiting to get cash tips and they aren't content having their tips placed on their next paycheck, either. Switching to cashless payments streamlines the entire process for both the business and employee side, making it a natural transition in the era of post-pandemic payments.
Essential Workers Issue Essential Demands
The transformation to digital payments makes it easy to see why workers are demanding that the way they get paid catch up to the way consumers are paying. Again, this is a change that has been growing for some time, but the pandemic accelerated it. Last year many people who were deemed “essential workers” found themselves at increased risk for serious disease while navigating unprecedented change and evolving regulation in real-time, without receiving additional benefits or protection. People are fed up. This is reflected in the current labor shortage that we’re seeing—people are reluctant to return to jobs they don’t feel are worth it.
But employers aren't without strategies to incentivize workers back to the team. According to a report from Morgan Stanley, 60% of workers say they’d be more likely to stay at a job if their employer offered financial benefits that helped their day-to-day lives—and offering earned wage access can increase retention rates by as much as 36%. Earned wage access is when you offer workers access to a portion of their earnings ahead of payday. It’s a key component of financial wellness, and can help people cover unexpected bills or expenses without overdrafting their account.
It’s clear that attracting and retaining workers is now a bigger challenge than ever. Workers are seeking out companies who offer a clearer path to financial wellness, whether through earned wage access or instant digital tips or mileage reimbursement after each shift. In short, they want the way they get paid to match up to how consumers are paying for things: They want it to be fast, digital, and convenient.
The Gig Economy Adds Fuel to the Fire
To understand the new world of payments, you also have to be well-versed in the gig economy. Fifty years ago (or, hey, even 10), a 9-to-5 was the standard when it came to the world of work. But over the years, people have found more freedom to carve out their own path and shape their careers in different ways. The growth of the gig economy was already in motion, but again, the past year has sped up its transformation. The gig economy is now expanding three times faster than the U.S. workforce as a whole, and it’s projected that by 2023, more than half (52%) of the US workforce will be involved in gig work of some kind.
So what does this mean for your business and, more importantly, for how you pay your workers?
For starters, gig growth has set new expectations and increased competition. Whatever industry your business is in, if you employ hourly workers, you’re now competing with gig platforms. Whether you're a gig platform wondering how to pay 1099 workers or a company with W2 employees, people have more options than ever and you want ways to create loyalty among your workers. And if the competition is offering more compelling benefits, you’re likely to lose out.
Another thing to consider is that gig work comes with a substantial amount of pay variance, just like other hourly worker jobs. Delivery drivers, restaurant workers, hair stylists, and other workers who rely on tips saw an increase in pay variance due to the unpredictable nature of the pandemic. But even pre-pandemic, pay variance has long been a part of hourly work. People in this position want to get their wages and tips as soon as possible so they can better budget and plan for their week.
Modernizing Your Payments Technology
The switch to digital payments on the consumer end, new worker demands, and the growth of the gig economy have all fueled a new era of payments. Paper checks and other traditional payment methods are disappearing from the consumer payments ecosystem—and similarly, should be phased out for employer-to-worker payments as well.
The modern worker wants payment methods that create less pay variance and the ability to budget. They want popular benefits like earned wage access, which allows them to access a portion of their wages ahead of payday so they can compensate for unexpected bills or expenses if needed. And they want digital wallets instead of paper checks,which enable them to get paid and make payments from their mobile phone. In short, they want fast, digital access to their earnings—and they aren't going to settle for less.
It’s tempting to think delivering these financial tools through upgraded payments technology might be costly, but it’s not the case. Click below to learn how Branch can help you deliver upgraded, real-time payments technology to your company—at no cost.