We’ve written previously about earned wage access (EWA). This branch of fintech allows employers to give employees an advance on their wages, often for a small fee.

The EWA space has a missionary angle to it. Many companies in the space tout the fact that EWA helps workers, particularly those at the lower end of the wage spectrum, avoid more toxic avenues like payday lending. Many of these platforms also argue that EWA, by freeing workers of worry over having money for food or transportation, makes them better, more productive workers.

A bigger picture view of EWA is that it exists as part of a broader movement, enabled by technology, that is gradually divorcing labor (including freelancers and gig workers) from the notion of having to wait to get paid. We are increasingly living in an instant-payment culture. Uber drivers, Doordashers, and other gig workers have this option, for a fee of course. And some payments platforms like Bill.com will pay out an invoice before it clears, also for a fee.

A Calculated Risk

The EWA platforms assume some risk in fronting the money. But the risk is generally manageable. After all, the party on the hook — generally a large employer — is generally good for it. Similar to BNPL, which puts up the money on the assumption that its big retail partners will make good as well.

When we wrote about this space back in May of last year, we observed the following.

We no longer buy disposable cameras when we go on vacation. Because we have smartphones. We no longer make our own playlists (or mixtapes for you GenXers). Because we have Spotify. Soon we may no longer let our employers determine when we get paid. Because we have fintech.

Sounds liberating, doesn’t it? There is, however, an argument (or at least a caution) against EWA. The concern is that workers can become dependent on these wage advances. And even if they are charged only a modest fee, it still eats into their already low wages.

Still, for now, at least, the pros seem to outweigh the cons. However, like with buy now, pay later, which operates on similar principles, the costs of EWA may take a while to become apparent.

A Global Phenomenon

EWA platforms have popped up all over the world, from North America to Africa. Payflow, a Spanish EWA that has recently expanded into South America, has raised a $9.1 million Series A funding round led by the London-based Entrepreneurs Fund, with participation from Y Combinator, Rebel Fund, and others.

According to Crunchbase, this latest round brings Payflow’s cumulative funding since launch to $14.5 million.

The company sets itself apart by not charging employees fees to access their funds. This sets them apart from most EWAs, which will exact fees from workers, in particular, if the employer is unwilling to cover the cost.

This may prove to be a sticking point for Payflow, as employers reluctant to pay for the advances may choose not to offer EWA, or go to a platform that lets them pass the cost on to the wage earner. However, in the era of the Great Resignation, this kind of perk may soon move from nice to have to table stakes if the employer is concerned about reducing employee churn.

From EWA to Neobank

Payflow was launched in Barcelona in 2020. Since then the company has expanded to Chile and Colombia. And now, with fresh funding, it has ambitions to become more than just an EWA platform.

‘Our mission is to bring financial well-being to millions of workers in Europe and Latin America and this is just the beginning,” Payflow Co-founder Benoit Menardo said in a LinkedIn post.

“Earned Wage Access (EWA) is now a category and we are proud to be leading the pack in our region.”

Menardo then added big announcements are coming involving product, expansion, and team.

An article in TechCruch revealed that Payflow has ambitions to use EWA as a foundation for building a “super app”. What the company appears to mean by “super app” is that it wants to evolve form just offering EWA to becoming more of a full service financial application for workers.

The company’s stated ambition is to increase its customer base 10x (from 100,000 users today). And it sees becoming more akin to a neobank than an EWA as its best pathway to that level of growth.