Earned Wage Access (EWA) is a Financial Service That Enables Employees to Access Their Earned Wages Before Their Scheduled Payday
EWA allows employees to receive a portion of their earned wages, which they can access through an app or online platform, such as XTM’s Today Financial.
Access to an earned wage access (EWA) service can be beneficial for workers who need access to cash for unexpected expenses or emergencies. In traditional payroll systems, employees typically receive their wages on a set schedule, such as bi-weekly or monthly. However, this can create financial stress for employees who face unexpected expenses or emergencies before their next payday. EWA provides a solution to this problem by allowing workers to access a portion of their earned wages at any time.
Another benefit of EWA is that it can help employees avoid taking on high-interest debt or overdraft fees. In traditional payday lending, borrowers can end up trapped in a cycle of debt due to high-interest rates and fees. EWA can be a more affordable alternative for employees who need access to cash quickly.
Another advantage of EWA is that it can improve financial wellness and reduce financial stress for employees. By giving workers more control over their earned wages, EWA can help employees budget more effectively and avoid financial emergencies. This can also help employers reduce turnover and improve productivity, as employees who are less stressed about their finances are more likely to be engaged and productive at work.
There are a number of companies bringing EWA to workforces, but the most attractive opportunity for investors might be XTM Inc. (CSE: PAID) (OTCQB: XTMIF) (FSE: 7XT), a Canadian fintech startup that is looking to revolutionize the employer-employee relationship.
One of the main competitors of XTM, Rain, was in the news recently after securing over $100 million in venture capital funding. The company offers its services directly to employers by reviewing their financial history, estimating future revenue and advancing funds accordingly. Once Rain sends the earned wages to employees, the advances are deducted.
Rain’s service is free for employers; the company generates revenue via fees incurred when employees withdraw their earned wages from their accounts. These ~$3 fees, similar to ATM fees in both effect and price, can be avoided entirely by opting to wait longer for the withdrawn money to hit one’s bank account.
Another competitor of XTM is DailyPay, whose services are similar to Rain’s. One notable exception is that DailyPay offers a debit card, called the Friday card, that allows users to access their money without it first going to their bank. In addition to getting access to their funds in a more timely manner, debit card users can avoid the fees they would usually pay to access their funds.
When users swipe their debit card, DailyPay can earn interchange fees, which are the fees that merchants pay to credit card networks, such as Visa and Mastercard. These interchange fees are a percentage of the money spent instead of the flat fee users pay to withdraw their money, making debit card customers much more lucrative for the company.
While both Rain and DailyPay have attractive products, XTM Inc. is looking to bring their EWA service, Today Pay, to new heights by integrating other vital business processes into the platform. Today Pay’s platform is broken down into five verticals: Today Payments, Today Tip Calculator, Today Timely, Today Wellness, and Today Financial.
Today Payments are the EWA component and the backbone of the platform. It operates in much the same way as Rain and DailyPay, with fees to withdraw their funds and a debit card to earn interchange fees. Today Payments integrates with leading payroll and POS platforms, such as Square and Clover.
XTM Inc. is heavily focused on the hospitality industry and other industries where tips are common; the internally-developed Today Tip Calculator allows businesses to automatically calculate an employee’s total tips, the tax burden on those tips and their take-home pay. This gives employees access to their tips faster while ensuring they have funds set aside for taxes.
The final vertical dealing with employee pay is Today Financial, which offers cloud banking for employees that want to keep their money in one place. The bank includes standard offerings like a debit card and cash-back rewards and also has a highly rated mobile app.
Expanding beyond employee pay, Today Timely is the platform’s employee scheduling vertical. Employers can manage scheduling, callouts, shift replacement and last-minute shifts. The system also gives employees the ability to bid on changes and jobs, increasing the schedule flexibility that’s so important for hospitality employees. Today Timely is fully integrated with other scheduling apps, such as BookJane and Clockify, allowing for increased opportunities for both employers and employees.
Finally, there’s Today Wellness, the employee benefits vertical, which is focused on improving employees’ personal lives via virtual healthcare and financial goal setting. These benefits have been shown to improve employee morale and, thus, their productivity.
Thus far, Today Pay has been shown to be a significant success with hospitality employers. Over the 2+ years since the pilot program was launched, the user base has grown from under 12,000 to over 67,000. Major brands currently using the platform include Denny’s, Pizza Hut and Aramark. XTM has also introduced the platform to new industries, including beauty salons and golf courses, with future plans to enter professional staffing and healthcare in the near future.
Despite the success they’ve had and the promising outlook for their future, XTM Inc. (CSE: PAID) (OTCQB: XTMIF) (FSE: 7XT) appears potentially undervalued at current market levels. XTM’s current market cap of only $29 million is relatively low for a company that has the potential to disrupt as they do. No doubt the broader macroeconomic environment is punishing smaller stocks like XTM but investors that believe in the company and understand the underlying value should be richly rewarded in the years to come.
Shares of XTM last traded at $0.18 per share. YTD, PAID stock is up +68.18%.
XTM Inc. (CSE: PAID) is a paid client of Wealthy VC.
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