Unlock the secrets to implementing powerful incentives, helping you become your customer’s primary financial institution.
Earned Wage Access is a Gateway to Primacy
With so much competition in consumer finance, acquiring the customer’s deposit can be a challenge. Earned wage access (EWA) provides a powerful incentive for customers to switch their direct deposit to you and grow your share of wallet.
Direct Deposit Switching Matters for Your Growth Strategy
Capturing the direct deposit is a top priority for financial service providers as consumers diversify their banking and spending habits across fintech apps and services.
Automated direct deposit switching is essential to becoming a consumer’s primary account and is the gateway to increasing customer lifetime value by up to 32X.
Additionally, it’s a top feature demanded by mobile banking consumers and for good reason: manual deposit switching is tedious, time-consuming, and risks consumer attrition through the use of paper forms.
With top neobanks and even cryptocurrency exchanges implementing automated switching, the trend is clear. Still, many of the financial apps consumers use don’t provide automated deposit switching and risk losing business to innovators that offer more seamless experiences.
Consumers have become accustomed to automation, and they’re unlikely to compromise for companies that don’t offer it. To remain competitive, financial service providers must prioritize automated direct deposit switching on their product roadmaps.
The Role of Earned Wage Access in Increasing Deposits
You can drive customers to switch their direct deposit by offering them access to EWA.
You can capture a larger share of wallet by unlocking higher EWA limits when customers allocate more of their direct deposit. (When a customer opts to switch their direct deposit, they’re given the opportunity to switch their entire paycheck, or switch only a portion.)
In addition to strengthening your direct deposit strategy, EWA can attract new customers and retain existing ones – a crucial benefit in times of fierce competition in financial services.
Covering monthly expenses remains the most unmet need for employees, according to a recent Mercer report. 2024 data from the Federal Reserve, further confirmed that 37% of adults say they could not cover a $400 emergency expense with cash or cash equivalents.
The following pages will help you understand why EWA matters to customers, the pros and cons of available EWA implementation options, and how you can construct a powerful EWA program to grow deposits and achieve primary bank status.
Introduction to Earned Wage Access
Earned wage access is exactly what it sounds like: people work daily, but they get paid 2 weeks later. Give consumers access to their earnings before their typical payday.
EWA is an evolution from simple cash advances, which are often just a small fraction of the money that’s available before payday and have a reputation of being predatory in nature.
77% of consumers surveyed by American Banker said they would use EWA if their credit union or bank offered it.
According to the Consumer Financial Protection Bureau, approximately 7.2 million workers in 2022 used employer-partnered earned wage access (EWA) products to access over $22.8 billion in wages before their scheduled payday. Use of these services grew by over 90% between 2021 and 2022.
Without access to real-time employment data, companies that offer EWA can take on credit risk, which caps the value of the service. With Pinwheel, that risk is significantly lower, so companies can extend more money, more often.
Two EWA Models Have Emerged
Two EWA models have emerged, but neither offers a complete solution to the end user:
- EWA as an employment benefit — Employers that offer EWA as a benefit do so by partnering with companies that connect to their payroll systems, verify the employee’s earnings, and make them available for withdrawal. A 2024 report from the International Foundation of Employee Benefit Plans found that earned wage access was offered by 2.5% of corporate employers, and among them are some of the biggest of all: Walmart, Amazon, Target, McDonald’s, Uber, Lyft, Taco Bell and Arby’s.
- Direct-to-consumer EWA — Direct-to-consumer EWA is an option for everyone who doesn’t have access to on-demand pay via their employer. Because these providers don’t connect to payroll or income platforms, they determine earned wages by reviewing historical direct deposit transactions.
Source: Arizent
Earned Wage Access Matters to Consumers
The expansion of EWA products is very important for consumers who live paycheck-to-paycheck. For anyone who struggles financially, EWA can mean the difference between being able to pay for an unexpected expense and taking out an expensive loan that will only add to their financial strain.
Without access to affordable credit products, many people turn to payday loans. The average annual percentage rate (APR) of these loans can go as high as 664%. It’s not uncommon to read about consumers who fell into a debt trap after getting a payday loan, while some have even had to file for bankruptcy.
With EWA as an option, consumers can access their earnings to cover emergency expenses and avoid defaulting on an expensive loan.
The percentage of payday loan borrowers who default on their loans in an 11-month period is 20%, while 64% renew. In comparison, EWA providers successfully recoup advances 97% of the time.
Source: Consumer Financial Protection Bureau
Real-Time Data Connectivity and Accuracy Is Crucial for Successful EWA Products
To build a market-leading EWA product – one that has a low risk of loss and allows greater access to earnings – underpinning it with payroll data connectivity is a must.
Connectivity to payroll and income platforms enables two processes that are essential to EWA:
- Retrieving accurate real-time income and employment data
- Enabling reliable repayment via direct deposit
For a single bank or fintech to launch a payroll-powered EWA product at scale, it would have to connect to hundreds of payroll and income platforms – a process that would require over a year of development. With a single payroll data connectivity API, financial service providers can compress months of development into weeks and quickly develop a low-risk EWA product for eligible customers.
Pinwheel-Powered Earned Wage Access in Action
- Integrate Link Modal, our flexible drop-in UX, into your app for a fully native user experience for automated direct deposit switching. This enables your customers to give Pinwheel permission to access the data inside their payroll platform. Don’t forget webhooks, notifications, and win-back campaigns.
- Use the initial data set to understand customer behavior and forecast an EWA business case and design an EWA product.
- Gate EWA and other value-added services behind direct deposit enrollment, providing an incentive for customers to permanently switch their direct deposit
- Monitor EWA activity and payback. On payday, you will recover the cash advance directly from the customer’s direct deposit, remitting the remaining funds to their bank account.
- Expand coverage and product offerings to increase customer lifetime value and engagement.
Launch Low-Risk Earned Wage Access and Grow Deposits
Increasing the conversion rate for direct deposit switching begins with implementing Pinwheel Deposit Switch and launching EWA through Pinwheel Earnings Stream.
With Pinwheel Deposit Switch you can:
- Get insight into your customer’s deposit allocations
- Be notified when allocations change
- Reliably recoup funds you advanced as part of your EWA solution
By offering EWA as a benefit to customers that make the switch, you can further encourage customers to choose you as their primary financial institution and grow share-of-wallet. Considering EWA is in high demand, there’s no better time than now to give your customers more freedom over how they get paid.
As you build your EWA solution, you can rely on Pinwheel Earnings Stream to provide verified income and employment data for eligible customers and benefit from the low risk that comes with real-time payroll data updates.
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Contact us to learn more about how Pinwheel’s Direct Deposit Switch APi can help you grow deposits, implement earned wage access, improve existing products, and launch new ones.