Of course, payday only comes around once a week, fortnight or even just once a month. But while that makes life easier for the boss, it also means there can be a long wait between pays. Any urgent expenses that pop up before payday can cause serious financial strain on employees, and borrowing from a dodgy payday lender may be the only option. That’s where earned wage access comes in.
It’s actually pretty simple when you get down to it. It just describes a system where employees can get the money they earn as they earn it, instead of waiting for payday. There’s no borrowing or interest, and any money paid out part way through the pay cycle just comes out of the amount paid on your normal payday. So let’s say you usually get paid $2000 in the hand every fortnight - one week into your pay cycle, you’ve already earned $1000, but you usually can’t get your hands on it. With earned wage access, you can.
Now, we caught wind of this idea ages ago, and we thought it was pretty exciting. New Zealand has a huge issue with private debt and outrageous interest rates on microloans. There’s an alarming number of Kiwis living week to week, leaving them vulnerable to ruthless lending practises. Under NZ law, lenders are legally permitted to charge huge amounts of interest, so when somebody borrows a couple of hundred bucks to cover an urgent necessity, they might end up paying back their entire fortnightly earnings or more.
Now, we’re well aware that payday loans are a symptom of a bigger problem with poverty and financial literacy. But while we're not in a position to change laws or major economic forces, we can offer a way better alternative.
A couple of years back, we built Pay Advance, which gave employers the ability to offer their teams “advances” on their pay, getting their earned wages prior to payday. We were really excited to bring this option to the market, and our customers were stoked to have a way to offer their employees a new level of financial freedom. However, the hurdle was that employers needed to cover the payment - which is disruptive to cash flow and pretty challenging financially for most small businesses. So while we had provided the tech to make earned wage access easy logistically, there was still a big barrier preventing many of our customers from actually taking advantage of it.
But not anymore! That’s exactly what makes PayNow so awesome. With PayNow, the employer doesn’t have to do anything - the payment is funded by BNZ, and then paid back out of payroll when payday comes around. Plus, this feature is accessible to any PaySauce user, whether or not they bank with BNZ. So there’s really nothing to stand in the way of on-demand payday!
Payday loans are alarmingly easy - some of them can be applied for in a text message. So to be an effective alternative, we had to make PayNow just as simple.
Here's how it works:
Employees request a portion of their earned wages on their mobile.
The payment is funded by BNZ and comes through usually within 2 hours!
When payday rolls around, the advanced amount is taken from the standard wages or salary and paid back into the BNZ fund.
Rinse and repeat!
Now, you might be feeling a little skeptical and wondering, what’s in it for you guys? Well, like we said, we’re not too keen on payday lending, and we’d like to see it get chucked. Plus, this is a pretty cool feature and we think people are going to be excited about it, which means more customers for us! So while we’re not directly making money off this initiative, it’s a smart business move, and it makes us feel pretty darn good.
So that’s how PayNow works!
Find out a bit more and see how you can get onto it.
Learn about BNZ’s other community finance projects.