At Branch, we’ve been exploring where we can take our company next in order to help working Americans get ahead financially—and support the businesses who pay them. What we’ve built over the past several years hasn’t changed: tools to provide free, faster payments to workers. But we’re now proud to offer an Employer Payments Platform (EPP) that can help technology partners provide a more modernized payments solution to business customers.
We decided to call our platform an Employer Payments Platform because we believe that by changing the way employers can pay their workers, we can simultaneously help both businesses and the American workforce. And by partnering with technology companies in the spaces of HR, payroll, and workforce management, we’ve found we can empower even more businesses and, ultimately, hourly employees.
Our fast, flexible, and free platform has a lot of different use cases. It can accelerate payouts to gig workers. It can provide digital tip payouts to delivery drivers directly after their shifts. It can offer earned wage access (EWA) to hourly workers if they need it. And because we handle the capital for businesses, they’re not responsible for any prefunding or cash management—we are. We’re helping them pay their employees faster and streamline payroll to make everyone’s life a little easier—without any hassle on their end.
Many factors have necessitated this transformation, from the move towards cash-free payments to the growth of the gig economy. As more workers look for on-demand pay, offerings like EWA have become table stakes for companies to provide their employees. Your business customers are looking for a way to accommodate this shift. But instead of building a solution in-house, our EPP can do the heavy lifting for you—helping you deliver an instant value-add to your customers and solve more of their problems. Read on to learn more about what an Employer Payments Platform is and what it can do for your business.
Factors driving the need for an EPP
Creating an Employer Payments Platform didn’t happen overnight. Changes to the world of work were taking place long before the pandemic hit, although COVID naturally accelerated the need for a larger transformation. Here are a few key ways the world of work has changed over the past few years:
1. Movement away from cash payments
Consumers had been moving away from using cash payments long before COVID hit. The development of Apple Pay and Google Pay accelerated the use of mobile purchasing, and today, more people pay for things online than ever before. Yet the transition to cashless transactions (and the growing demand for contactless payments during a pandemic) has left many businesses with cash flow problems: Their employees get tipped digitally, yet they’re tasked with cashing out tips for them.
If money is coming into an organization digitally, why should it still be going out as a paper payment? Why should employers need to make trips to the bank to make change, or require their employees to wait two weeks to get their tips put onto their next paycheck? Cash payments are creating a huge bottleneck in the payments process, creating stress and lost time for businesses.
2. The need for on-demand pay
More and more, people need access to their earned wages ahead of time, and the two-week pay cycle is partly to blame. If an unexpected bill arises for someone who’s living paycheck to paycheck (78% of workers are), they’re met with unfavorable options. They might be thrust into debt, charged hefty overdraft fees, or forced to turn to expensive and predatory payday loans.
And unfortunately, it seems the concern for meeting day-to-day needs has only increased over recent years. As part of our 2020 Annual Branch Report, we surveyed more than 3,000 workers across a variety of industries. 94% of respondents said accessing their pay before payday would be helpful, which was up 14 points from last year (79.6%).
Earned wage access (EWA) and digital banking are no longer nice to haves for businesses—they’re must haves if they want to retain their employees with competitive financial wellness benefits.
3. Growth of the hourly workforce and gig economy
It seems hard to remember a day before Uber and Instacart ushered in a new era where people can easily pick up side hustles or make gig work their full-time job. More and more, people are creating the kind of work schedule that works for them, instead of being locked into a 9 to 5. While many companies have been forced to lay off workers throughout the pandemic, GigSmart saw a 46 percent increase in hourly gig job postings since March. And experts predict that if the gig economy continues to grow at its current rate, more than half the U.S. workforce will participate in it by 2027.
The pandemic has clearly exacerbated the already steady increase of gig economy growth. Many people were furloughed from their former jobs or had to reduce their hours. People began looking for new ways of working and earning money. The freedom and autonomy of gig work has long been appealing for many reasons.
However, the concept of pay variance also comes into play when discussing gig work. Gig workers might earn significantly different amounts of money from week to week depending on how many shifts they can pick up. This creates an added need to pay people faster and give them as many tools for financial stability as possible. Drivers need to be reimbursed for mileage after each shift; tips should be in their bank account immediately after as well.
All of these factors—from dwindling cash payments to the need for on-demand pay and growth of the gig economy—have created an urgent need for modernized payments technology.
The problem with outdated payments technology
So, why hasn’t the world of payments technology caught up? It’s easy to see how much has changed about the working world over the past few years, but unfortunately, how people get paid hasn’t advanced at a similar pace. Many businesses are still issuing paper checks or using paycards that cost unnecessary time and money to manage. They’re trying to handle their cash flow in a world that now primarily relies on card payments—and some are even struggling to tip out their employees at the end of the night because of it.
Their employees, in turn, are getting charged fees by traditional banking services or paycards. They have to wait to access their tips and wages until payday. Delivery or truck drivers sometimes need to pay for gas mileage out of their own pockets, and aren’t getting reimbursed until weeks later. All of these scenarios are damaging to the average hourly worker who’s living paycheck to paycheck.
The traditional two-week pay cycle, after all, hasn’t been working for a while. As we alluded to, up to 78 percent of workers were living paycheck to paycheck before the pandemic hit. That kind of financial instability is stress-inducing and often leads to getting stuck in a cycle of overdraft fees, debt, and high-interest payday loans. Now, more than ever, employees need access to their money in a faster, more secure way that has caught up to the rest of payments technology in 2021.
Status quo payment methods simply aren’t working. They’re not working for business owners and HR directors, who are overwhelmed with inefficient, sluggish payroll processes and struggling to manage their cash flow. And they’re not working for employees, who are stuck waiting to access their wages and often living paycheck to paycheck. They need to be paid in a more financially empowering way—one that’s fast, doesn’t charge them fees, and helps them gain more financial stability.
A turning point in payments
We’ve seen since day one that paying people faster in a more secure way has the potential to transform the lives of working Americans. Plus, removing those logistical burdens and cash flow headaches for companies can help them save time, money, and maintain a competitive edge. As the demands grow louder for accelerated, contactless payments, companies are finding themselves at a turning point. They can either continue with the status quo, or modernize in order to benefit both their business and the people who power it.
Read next: Who needs an EPP?