By Paul Bartlet, CEO, CloudPay
The areas of banking and financial services have already faced a multitude of digitizations. Online banking has radically changed consumer habits, with the ability to transact quickly and easily through online apps and platforms, changing the way we manage all of our finances and cash flow. And of course, the pandemic has only increased the use of digital financial processes, as in-person trading has become limited during shutdowns.
The ever-increasing demand for new and improved fintech is evidenced by the expansion of the fintech field. According to analysis by global market research firm Allied Market Research, the global fintech market was valued at $110.57 billion in 2020 and is expected to reach $698.48 billion by 2030, with growth at a CAGR of 20.3% from 2021 to 2030.
The current lack of digitization of payroll and payments
Technology in payroll processing has not kept pace with digital transformation in other industry sectors. Migration to the cloud has been slow despite the revolution in software and technology capabilities. The same applies to the mode of payment of wages. Treasury functions are still dependent on the existing infrastructure and complex banking system, with very little digitization in the way transactions are conducted and employees receive their salaries.
On the other hand, the digitization of consumer financial services has progressed rapidly, with online electronic payments and mobile payment apps becoming commonplace as new smartphones and improved online security software hit the market. There has been an increasing use of digital or mobile wallets where financial accounts and information are stored, accessed or used through software rather than a physical wallet, which has changed payment processes and mindsets. But these innovations are rare in the world of payroll payments.
Expectations of employees and consumers
Employees are consumers who today can instantly access almost anything through an app – from lunch sorting through Deliveroo and same-day deliveries through Amazon, to instant money transfers through banking apps. At a time when this mindset of instant results is the norm, people are wondering why they should wait to access the salaries they’ve already earned. Why should they wait for payday to get paid for the work they did?
We must also consider how the world of work itself has changed. The pandemic has led to a general consensus that it’s okay to question societal norms, including how and where we work. Mass remote work wasn’t common before the pandemic, but now the benefits businesses and employees have enjoyed have given rise to new ways of working. The same can be said for how people get paid.
The growth of pay-on-demand
So, as employees begin to question how and when they get paid, and companies look to update existing systems and processes, digital payment capabilities for employee payroll are emerging. It is now possible to enable employees to efficiently choose their own payday (or paydays) with on-demand access to earned wages via a mobile app. Progressive employers offer this pay-as-you-go facility as a low-cost, high-value benefit to employees, giving them control and flexibility over how and when they receive their pay.
Bank rails or card rails to pay wages
We are also seeing an appetite for instant payment methods to avoid the typical three days allotted for payments through traditional banking rails such as SEPA, ACH, BACS, Swift, Wire.
In fact, we’ve worked with Visa to develop and deliver fast digital payment options that are simply more efficient and better suited to the modern world. The new digital payment method that has been developed makes it possible to pay salaries directly to employees’ debit or credit cards using Visa Direct, Visa’s real-time push payment platform. Visa Direct leverages the payment provider’s powerful global network to facilitate fast digital payments around the world, with industry-leading security and compliance controls.
After completing a customer’s payroll calculations, CloudPay can now make salary payments in seconds rather than days. Card payment transactions are made via Visa Direct to any supported 16-digit debit or credit card (PAN) number. Employees can still receive salary payments as usual to their bank accounts, but payments can be made 24/7 (without bank opening hours limitations) and arrive faster via the Visa Direct’s single network rather than traversing multiple systems across banking networks.
How to modernize payroll processes
The challenge of modernizing payroll processes, however, is the need to stay ahead of the latest technology and software developments. For payroll teams, there is a common belief that new digital integrations will take time to manage and that a change in processes will create more administrative burden or expose businesses to new risks. But this is not the case.
Sophisticated technology plays a role in making tedious or labor-intensive processes faster and easier in our daily lives, and it can have the same impact on payroll. Services like pay-as-you-go can seem complex to manage, but can actually streamline processes. When we think back to when online payments were first introduced, there were understandable concerns about change – but very few of us today could imagine life without mobile banking, and the ease and speed they bring to make and receive payments. Why should the way we handle payroll and pay salaries be any different?