CFPB 2.0: Prepaid Cards, Earned Wage Access, and Financial Inclusion

With a Democratic administration only weeks away from taking office, some are wondering about the prospects for a revitalized Consumer Financial Protection Bureau (CFPB). Created during the last Democratic administration – and largely sidelined during the now-ending Trump administration – the CFPB has found itself back in the fintech headlines in recent days.

PayPal Takes On CFPB Over Card Rules

A federal judge brought resolution to a lawsuit PayPal filed against the Consumer Financial Protection Bureau in December 2019. U.S. District Court Judge Richard Leon agreed with PayPal that the CFPB had overstepped its authority in its effort to regulate prepaid cards and digital wallets. PayPal had asserted that in forcing them to include “short form” fee disclosures that included categories that were not relevant, the CFPB’s rule was confusing customers. What’s worse, customers were being led to believe, PayPal claimed, that they were exposed to a wide variety of potential fees – which was not the case.

The situation seems almost to be one of mistaken identity. The rules being applied by the CFPB with regard to expenses like ATM balance inquiries make sense for providers of reloadable prepaid cards, but not for PayPal, which does not subject its customers to these fees. That said, it was the CFPB’s rule-making authority itself that was the target of what Reuters described as a judicial “decision studded with exclamation points.”


PayActiv Wins Earned Wages Access Approval

Meanwhile, the Consumer Financial Protection Bureau’s aim seems to be more true in the case of of earned wage access. PayActiv, Finovate alum and innovator in the earned wage access space, announced last week that its program is exempt from Federal lending laws per new regulations established by the CFPB.

The key issue was whether or not PayActiv’s Earned Wages Access (EWA) program, which enables workers to get access to their already-earned wages in advance of scheduled paydays, involves credit. If it did, the program would be subject to the Federal Truth in Lending Act, as well as Regulation Z.

Fortunately, the CFPB ruled that “the accrued cash value of an employee’s earned but unpaid wages is the employee’s own money” and, as such, does not create a debt obligation. PayActiv added that the approval was both the first of its kind from the CFPB and specific to PayActiv’s EWA program. The CFPB added that the company’s initiative was an “innovative mechanism for allowing consumers to bridge the gap between paychecks (and) differs in kind from products the Bureau would generally consider to be credit.”

PayActiv co-founder and CEO Safwan Shah called the approval a “watershed moment” for his company. “We are very proud that the CFPB has recognized this important innovation and validated PayActiv’s pioneering work in creating low or no-cost employer-sponsored access to earned wages. Employers can take comfort in knowing that PayActiv continues to be the leader in responsible EWA for employees.”


Synchrony Gets Nod for Secured/Unsecured Credit Card

The new dual feature credit cards (DFCC) from Synchrony Bank are designed to provide financing opportunities for consumers who do not have strong credit profiles. Cardholders provide a security deposit in order to use the credit cards in their secured mode and, if certain eligibility criteria are met after a minimum of one year, the cardholder becomes eligible to use the card in its unsecured mode. And last week, the CFPB gave the wholly-owned subsidiary of Synchrony Financial the green light to go forward with its DFCC solution.

In large part, the CFPB’s ruling for Synchrony represented a broader embrace of bringing financing to consumers with lower credit scores. The Bureau referred to these efforts as “represent(ing) a potentially significant point of access to credit for certain consumers” and favorably compared Synchrony’s dual feature card to other secured card offerings.

Critically, Synchrony will provide complete transparency with regard to the cost differences between the secured and unsecured features, including the lower rate on the secured card. Cardholders that graduate to the unsecured Synchrony credit card are not eligible to return to the secured card.


Photo by Ekaterina Bolovtsova from Pexels

PayActiv Receives $100 Million in Funding for Earned Wage Access Tech

Earned wage access startup PayActiv closed $100 million today for its technology that helps companies offer their employees their pay on a daily basis rather than wait for their bi-weekly paycheck.

The Series C round was led by Eldridge and includes existing investors Generation Partners and the Ziegler Link•Age Fund II. The investment brings PayActiv’s total funding to $134 million.

The company will use the funds to expand its client base, which currently consists of 1,400+ businesses and organizations representing more than four million employees. Walmart, Wayfair, and Ibex Global are some of the major employers in PayActiv’s portfolio.

“American families are facing more financial stress than they have in generations,” said PayActiv CEO and Co-Founder Safwan Shah. “The timing gap between work and wages is the main reason workers get hit with punitive late fees, overdraft fees and other penalties. Cumulatively, these fees reduce wages by seven percent every month. The PayActiv platform is the only system where everyone wins: employers lift worker morale with little to no cost and huge dividends; employees get wages when they actually need them most; and cash re-enters the economy faster, making communities financially healthier.”

PayActiv was founded in 2011 and has emerged as a major financial wellness tool for employers. In addition to offering flexibility around how frequently employees receive payment, PayActiv also gives employees multiple options of how they receive payment. Workers can opt for direct cash pickup, a PayActiv prepaid card, an instant Visa or Mastercard debit card load, an ACH payment, or use their wages to pay bills, make purchases on Amazon, or purchase rides on Uber.

The company also offers financial wellness and planning tools that help employees to save, budget, and manage their money. Additionally, PayActiv announced today that it will offer employers a retirement benefit in partnership with Security Benefit, a retirement services provider based in Kansas.

Demand for earned wage access tools are on the rise, especially in today’s post-COVID economy. Sending employees their paychecks on a daily basis can help them avoid overdraft fees and high interest financing options such as payday loans and credit card debt.

“The future of pay is not a two-week cycle,” said Eldridge Co-founder, Chairman, and CEO Todd Boehly. “By simply giving people access to their wages as they earn them, PayActiv increases the velocity of money, stimulating the economy and serving employers and employees by driving costs down and efficiencies up.”


Photo by DISRUPTIVO on Unsplash

Finovate Alumni News

On Finovate.com

  • Trends at FinovateFall: The Big, the Small, and the Surprises
  • DefenseStorm Launches New Fraud Monitoring Solution
  • From Start-up to Scale-up: Token Introduces New CEO Todd Clyde
  • Temenos Buys Kony to Boost its Front Office Technology for Banks

Around the web

  • PayActiv partners with Fiserv to streamline access to earned wages.
  • ABN Amro teams up with open banking solution provider Tink to bring multi-banking functionality to the bank’s Grip app.
  • Avaloq appoints Imad Abou Haidar as its new Head of Asia.
  • BeSmartee launches its new Mortgage Loan Officer (MLO) Command Center for loan originators.
  • Marqeta to create 175 new jobs in 2019, growing its workforce beyond 400 people.
  • SparkPost unveils new SparkPost Recipient Validation service, a sender reputation protection service that helps eliminate harmful bounces.
  • Azimo’s Richard Ambrose moves from COO to CEO, replacing Michael Kent.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Finovate Alumni News

On Finovate.com

  • Biometrics Tech Firm ID R&D Receives $5.7m Funding.
  • Bento for Business Hires on Two C-Level Appointees.

Around the web

  • Gusto opens office in New York City.
  • PayActiv adds Dan Quan to advisory board.
  • Citrix Analytics and Ping Identity partner to enable contextual access.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Finovate Alumni News

On Finovate.com

  • Equifax Buys PayNet for Commercial Lending Data.

Around the web

  • Ron Shevlin looks at the effects PayActiv’s technology has on the paycheck industry.
  • Thrive Global interviews Lynne Laube, COO and co-founder of Cardlytics.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

PayActiv and Visa Help Workers Access Earned Wages Earlier

PayActiv’s campaign to transform traditional payroll and help workers get access to earned pay when they need it just won a big new ally.

The company announced late last week that it was partnering with Visa and will leverage the company’s Visa Direct real-time push payments platform to enable PayActiv’s partner businesses to offer real-time deposits. Earned wages for employees of PayActiv partners will be available in real-time via a Visa debit or reloadable prepaid card – and PayActiv is offering its own branded Visa Prepaid Card for the occasion.

“With financial stress our industry needed earning enlightenment,” PayActiv CEO Safwan Shah said. “The PayActiv Visa Prepaid Card is exactly that – a game changer and a win-win solution. Employers can get better retention, recruitment and engagement, and employees can get on a path of holistic financial wellness with timely access to their earned but unpaid wages.”

PayActiv said that the use of its Visa Prepaid Card can help employees avoid fees that might otherwise lower take-home pay by as much as $200 a month. Accepted anywhere Visa debit cards are accepted, the PayActiv Visa Prepaid card has no monthly fees, no fees for loading earned wages on the card, and no cardholder fees when transacting with U.S. merchants or making cash withdrawals from MoneyPass ATMs.

“Visa Direct is helping to power a fundamental shift in how employees access wages they have already earned, outside of the traditional two-week payroll cycle,” SVP for Global Commercialization of Visa Direct Cecilia Frew said. “We are proud to be partnering with PayActiv to offer additional choice and flexibility to employers and employees when managing their financial well-being.”

PayActiv demonstrated the Saving in Units of Time feature of its platform at FinovateSpring 2016, winning Best of Show. Founded in 2013 and headquartered in San Jose, California, PayActiv announced a partnership with Walmart last fall, adding the retail giant to the number of locations where PayActiv employee members can access earned wages in cash. Also last fall, PayActiv scored a $20 million investment in a Series B round led by Generation Partners that doubled the company’s total funding.

Visa, which celebrated its 60th birthday last year, made its Finovate debut at FinovateSpring 2010. The company is also an alum of our developers conference, presenting its Visa Checkout solution at FinDEVr SiliconValley 2014. The global payments and financial services giant trades on the New York Stock Exchange under the ticker “V,” and has a market capitalization of $330 billion.

Finovate Alumni News

On Finovate.com

  • PayActiv and Visa Help Workers Access Earned Wages Earlier.
  • Temenos Drives Digital Transformation for Africa’s Vista Bank.
  • iSignthis Inks Banking and Payments Deal with Ibanera.

Around the web

  • BioCatch adds touchscreen pressure as a new behavioral biometric value.
  • NCR, Bluefin, and Powertranz team up to support POS card processing for Caribbean quick serve restaurants.
  • Experian launches Singapore-based incubator, Experian X Labs.
  • ETFLogic unveils ETFLogic Pages, a new platform for analyzing exchange-traded funds.
  • Minna Technologies and Exate earn spots in the fourth edition of ING’s FinTech Village.
  • BlueRush deploys its Individeo platform with a large Colombian bank courtesy of a partnership with Bee Concept.
  • Inspire Federal Credit Union goes live with NYMBUS.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Finovate Alumni News

On Finovate.com

  • Swych Powers WeChat’s Travelex Pay Service.

Around the web

  • Bento for Business partners with payroll and HR company Cast & Crew
  • PayActiv announces Walmart as Destination to Pick Up Cash-Based Earned Wages.
  • TechCrunch: Blockchain startup Blockchain to launch hardware wallet in partnership with Ledger.
  • Monetate and Bazaarvoice partner on product recommendation strategies.
  • CLA selects Expensify for its clients’ receipt tracking and expense reporting app.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

PayActiv More than Doubles its Funding with Fresh $20 Million

Employer-provided financial wellness platform PayActiv is receiving some wellness of its own this week in the form of $20 million. The Series B financing round was led by Generation Partners, with contributions from existing investors  Ziegler Link•Age Fund II and affiliate funds of Softbank Capital.

Combined with its previous investments totaling $13.5 million, today’s round more than doubles PayActiv’s total funding, which now adds up to $33.5 million. PayActiv will use today’s investment to expand its platform, accelerate growth, and develop more financial solutions for workers across the globe.

Mark Jennings, Managing Partner at Generation Partners, said that his firm chose to invest because it believes PayActiv has “the potential to positively change the lives of millions of workers, while also growing a profitable and successful business.”

The California-based company has experienced significant growth since its launch in 2012, expanding six-fold in the past year alone. Contributing to that growth was a large-scale contract signed with Walmart in December of 2017 and an agreement with ADP in July of 2018, which makes PayActiv’s services available to more than 600,000 businesses across the U.S.

Commenting on the growth, John Hawkins, Managing Partner at Generation Partners, said, “PayActiv has created a massive positive impact on the relationship between employees and employers. Already, they are settling more than $100 million in earned wage access transactions each month, and the company estimates that employees are avoiding an estimated $10 million each month in eliminated late charges, overdraft fees, and interest charges.”

As part of the deal, Hawkins will join the PayActiv Board of Directors.

At FinovateSpring 2016, PayActiv CEO and Founder Safwan Shah demonstrated how the PayActiv app encourages saving by helping users approach saving in units of time vs. percent of income. Earlier this fall, NPR featured PayActiv as Walmart’s payday loan alternative and in May the company was highlighted in the Wall Street Journal as a better alternative to payday loans.

Finovate Alumni News

On Finovate.com

  • PayActiv More than Doubles its Funding with Fresh $20 Million.

Around the web

  • IdentityMind Global selects Oracle Cloud Infrastructure to host its trusted digital identities regtech platform
  • Adobe launching Magento Payments with PayPal’s Braintree for payment processing.
  • Tangerine partners with Meniga for digital banking.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Finovate Alumni News

On Finovate.com

  • Credit Karma Buys Mortgage Platform Company.

Around the web

  • Coin Telegraph: Ripple partners with three crypto exchanges as part of XRapid solution
  • Insuritas partners with Alabama One Credit Union and Alabama One Agency Insurance Services to provide insurance offerings for members.
  • figo receives ZAG license and enables ‘License as a Service’ through RegShield.
  • NPR features how PayActiv helps Americans avoid payday loans.
  • MX named one of fastest growing companies in Utah for 2018.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

PayActiv Partners with ADP Marketplace

Courtesy of a new partnership, clients of ADP will get access to PayActiv’s Financial Wellness Platform. PayActiv announced last week that the workplace holistic financial wellness services provider will join the ADP Marketplace. This ecosystem of business apps will expose more than 600,000 employers representing 26 million workers to PayActiv’s technology.

“Companies leveraging ADP Marketplace can save as much as $50,000 annually for as few as 100 employees enrolled in PayActiv,” company CEO and founder Safwan Shah said. “Our holistic approach towards financial wellness is a win for both employers and employees.”

PayActiv provides a way for employers to help their employees better manage their financial lives. The company enables workers to get financial relief between paychecks – for example 50% of their already earned income – rather than relying on expensive payday loans or credit cards. PayActiv calls its strategy “timely earned wage access” or EWA and says the platform can be leveraged by both small businesses and larger companies to support not just timely EWA, but intelligent savings and budgeting, financial literacy, and counseling, and more. The platform is voluntary for workers, intuitive, and on-demand.

“Having timely access to earned income alleviates additional debt on already financially stressed individuals,” ADP Marketplace General Manager Craig Cohen said. “By offering PayActiv’s services via the ADP Marketplace, our customers’ employees now have on-demand access to money they’ve earned and can avoid costly alternatives.

PayActiv demonstrated its financial wellness mobile app at FinovateSpring 2016, winning Best of Show. Designed to help the underserved and working poor access quality banking services, PayActiv provides instant cash access, bill pay, bank transfer, savings and budgeting tools, and more.

Headquartered in San Jose, California, PayActiv has raised more than $17 million in funding. The company includes SoftBank Capital, Plug and Play Ventures, and RTA Capital among its investors.