Walmart's payroll advance partnership pushes the right buttons

Walmart’s payroll advance partnership pushes the right buttons

CUs could take a page from Walmart’s venture with Even and PayActiv.

February 3, 2018

Walmart’s December announcement of a partnership with Silicon Valley fintechs Even and PayActiv pushes all the right buttons.

It addresses the financial needs of its employee base, leverages advancements in artificial intelligence and data analytics in an easy-to-grasp fashion, and communicates concern for Walmart’s low-wage workers, a group that has been a flashpoint in public discourse.

Unlike a lot of “pressware,” the move has the potential to do some real good for over a million consumers. It’s also an area where I’d love to see credit unions become more proactive.

Even’s app is positioned as a financial wellness tool, automating much of the tedious and often confusing process of personal budgeting and cash flow forecasting.

Walmart is subsidizing this service for its 1.4 million employees on a “freemium” model. That’s a nice gesture in itself, but the real headline grabber is Even’s paycheck advance feature, powered by PayActiv.

The partners emphasize that Instapay is an advance of earned wages as opposed to a payday loan—an important distinction.

Because PayActiv provides a direct feed into the employer’s payroll system, the app can determine future funds that are already earned.

It could be argued that the entire process of weekly or bi-weekly pay disbursement is a vestige of a bygone era, with no reason workers shouldn’t have access to wages on an as-earned basis.

Walmart will provide employees free access to eight such advances per year, presumably obliterating use cases for a wide swath of payday loans.

Talk about disruption: Without insight into borrowers’ earning patterns, payday lenders will be hard-pressed to match this model or to avoid positioning their transactions as loans.

Of course, few employers have the critical mass to provide data feeds to 1.4 million workers’ earnings in one fell swoop.

Given many credit unions’ origins serving single employers, however, sufficient concentration may exist to create true win/win/wins:

  • Companies foster productivity by eliminating employees’ financial stress and distractions.
  • Employees avoid onerous payday lending fees and get a handle on their finances.
  • Meanwhile, credit unions add a service that helps attract new members and deepen relationships with existing ones, while advancing their mission of financial empowerment.

Credit unions could take a page from Walmart’s move.

GLEN SARVADY is managing partner at 154 Advisors. Follow him on Twitter via @154Advisors. His views do not necessarily reflect those of Credit Union National Association.