Earned Wage Access

This month two Canadian fintech lenders made Earned Wage Access (EWA) announcements:

  • Koho, the challenger bank launched will now allow clients to access a portion of their paycheque daily instead of waiting until the end of their two week cycle.
  • ZayZoon, the godfather of EWA in Canada announced a partnership with Visa making it easier for small businesses to offer early wage access.

So… what is EWA?

EWA is a fairly newly development product that allows employees to access the earned portion of their wages for a fee, instead of waiting until their actual payday.

But is it a loan? Good question; and depending who you ask, you may get a different answer.

The product can technically be calculated as an APR. However, some argue that this is still not credit because there is no “new money” being exchanged- only the “earned money.” This is still an emerging space and regulators haven’t fully caught up yet.

How did EWA start?

EWA emerged as an alternative to payday loans, which often have intentionally confusing terms that make it easy to get caught in a debt spiral.

Over 50% of Canadians live paycheque to paycheque, which means an unexpected cost like your car breaking down or your apartment flooding makes access to credit very important.

EWA was orginally popularized by fintechs like Dave and Chime in the US, but now is being offered by payroll processors directly like Humi and Ceridian.