Afridigest Thought Circle: Why are earned wage access solutions increasingly attractive across Africa and what are the keys to success?
Afridigest Thought Circle: Why are earned wage access solutions increasingly attractive across Africa and what are the keys to success?
An expert panel of founders provides insight, commentary, & analysis on the rise of earned wage access across Africa.
Afridigest provides ideas, analysis, & insights for Africa-focused founders, executives, and investors.
This is an Afridigest Thought Circle post where we convene expert practitioners to provide insight, commentary, & analysis on a specific question. This post also appears on Afridigest.com.
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We recently published ‘The rise of earned wage access across developed & emerging markets,’ which discussed how earned wage access solutions & platforms are proliferating worldwide — with tremendous momentum across emerging markets in particular.
In this edition of the Afridigest Thought Circle, we hear directly from the founders pioneering the earned wage access model across Africa.
QUESTION OF THE WEEK
Why are earned wage access solutions increasingly attractive across Africa and what are the keys to success?
Earned wage access (EWA) products — a mix of fintech, HR tech, & the on-demand economy — first came to market in the US in the 2010s and they've experienced tremendous momentum across emerging markets in recent years. Across Africa in particular, EWA startups & solutions seem to be rapidly multiplying.
What are the key drivers of this phenomenon, what do you make of EWA's potential and fit within African markets (e.g., is EWA being 'pulled' by consumers or 'pushed' by companies), and what do you see as the keys to long-term success? Moreover, what are the main opportunities & risks relative to earned wage access in Africa?
SPONSORED HIGHLIGHT
Paul Kimani
Co-Founder & CEO, WorkPay 🇰🇪
WorkPay is an HR, payroll, and benefits solution for businesses and organizations in Africa.
Earned wage access (EWA) is not an entirely new concept to businesses and employees in Africa. It has existed in some form or shape for a long time on the continent. For example, our experience shows that 8 out of 10 employers offer their employees some form of salary advance — a data point that shows the need from employees and the willingness of employers to ensure their employees are financially healthy.
However, over the last decade or so we’ve seen the fintech sector blossom across Africa and the world. These companies apply technology to traditional financial services problems and introduce gains of efficiency, simplicity, speed, and more. And the same is happening when it comes to employee wages, spend, saving, and even investment.
Across Africa, wages/salaries are traditionally paid on a monthly cycle, so employees have to find ways to cover expenses & emergencies between paychecks. Most of the time they resort to borrowing from banks or the many, readily available digital lenders. But these are either too slow or too expensive, and this creates a perfect opportunity for EWA.
While the potential for EWA in Africa is large and growing, the biggest challenge to EWA providers is to find ways in which they can offer the product for the lowest charge possible. Remember EWA is not a loan, it’s essentially early access to a salary someone has already earned. For this reason, I believe that success for EWA as a product over the long term lies in bundling it with other services.
Simon Ellis
Co-Founder & CEO, Jem (formerly SmartWage) 🇿🇦
Using WhatsApp, Jem helps employers worldwide send payslips, process leave requests, facilitate salary advances, and communicate with frontline employees in just a few clicks.
Earned wage access (EWA) as a product is a painkiller for employees, but a vitamin for employers. In order to drive adoption, EWA players need to educate the market about the benefits of EWA (which will take a long time) and find innovative ways to sell this product to employers. Giving employees access to their earnings is not enough — there need to be other bolt-on products/offerings which offer more tangible benefits to employers in order to sell this at scale.
The key to long-term success is distribution. Which companies can build adjacent add-on products that not only add value to employees but also clearly help employers save time and/or money in order to facilitate the distribution of EWA?
However, once an EWA player has 'acquired' an employer, the ability to upsell and offer additional products that are beneficial to both the employee and the employer is endless.