PayActiv

PayActiv is a financial services company headquartered in San Jose, California. PayActiv partners with companies to provide employees with financial services such as earned wage access.[1]

PayActiv, Inc.
TypePrivate
Industry
Founded2012 (2012)
Founder
  • Safwan Shah (CEO)
  • Sohail Aslam (CTO)
  • Ijaz Anwar (COO)
HeadquartersSan Jose, California, U.S.A.
ServicesEarned wage access
Number of employees
200 (2020)
WebsiteOfficial website

Services

To receive a cash advance for their unpaid wages in the current pay period, employees pay a $5 fee.[2] The company links with payroll providers such as ADP, Paychex and Kronos Incorporated to provide early access wages to employees.[3][4] The service is mostly used by companies with lower income employees who work to paycheck-to-paycheck.[5]

Criticism

In October 2020, the New York Times noted that the $5 fee PayActiv charges could be equivalent to over a 365% APR[6] which is comparable to the rates charged by some payday lenders.[7]

History

PayActiv was founded in 2012 by Safwan Shah, Sohail Aslam, and Ijaz Anwar.[8] In 2014, the company raised $4.3 million in funding.[9]

In 2017, Walmart introduced salary advances through PayActiv. As of 2019, an estimated 380,000 of Walmart's 1.4 million employees used the app regularly.[10]

In 2019, the company processed $2.5 billion in early wage payments.[11] That year, the company announced a partnership with Visa that would allow users to receive and spend paycheck advances through a prepaid Visa card.[12][13]

In 2019, PayActiv sponsored California Senate Bill 472, which would create a regulatory framework for earned wage access (EWA) providers in California.[14] The bill limited the transaction fees and the number of transactions that EWA programs could provide.[15]

In January 2020, David Reldy was appointed as the company's first Chief Legal Officer.[16] PayActiv partnered with OnShift in March 2020 to provide early wage access to workers in healthcare and rehabilitation facilities during the COVID-19 pandemic.[17] In August, 2020 PayActiv raised $100 million in Series C funding, led by Eldridge Industries.[18]

In December 2020, the Consumer Financial Protection Bureau (CPFB) granted PayActiv sandbox approval to provide Early Wage Access (EWA). The CFPB ruled that PayActiv was not a traditional lender since its EWA program did not create debt, and as such was exempt from the Truth in Lending Act.[19]

As of 2021, the company had partnered with 1,500 employers, including Walmart, Wendy's, and Pizza Hut.[20][21] In March 2021, PayActiv partnered with Hancock Whitney to offer earned wage access to bank clients.[22]

References
  1. Balogh, Shannen (January 24, 2020). "These 5 paycheck-advance startups have attracted a big wave of VC funding. Here's a rundown of the fees they're charging to break you out of the 2-week pay cycle". Business Insider. Retrieved 2021-04-07.{{cite web}}: CS1 maint: url-status (link)
  2. "PayActiv: A New Service Available in Times of Need -". www.lsslife.com. 13 September 2018. Retrieved 15 May 2021.
  3. Kumar, Todd H. Baker and Snigdha (2018-05-13). "A Better Alternative to Payday Loans". Wall Street Journal. ISSN 0099-9660. Retrieved 2021-04-07.
  4. "PayActiv joins ADP as it takes on payday lenders". PaymentsSource. 2018-08-08. Retrieved 2021-04-07.
  5. "Do paycheck advance apps improve financial health?". American Banker. 2019-03-11. Retrieved 2021-04-07.
  6. Bernard, Tara Siegel (2020-10-02). "Apps Will Get You Paid Early, for a Price". The New York Times. ISSN 0362-4331. Retrieved 2021-06-30.
  7. Leonhardt, Megan (2021-02-16). "Payday loans can have interest rates over 600%—here's the typical rate in every U.S. state". CNBC. Retrieved 2021-06-30.
  8. "A Pakistani-American entrepreneur raised $100 million for his Fintech startup 'PayActiv.'". TechJuice. 2020-08-20. Retrieved 2021-04-07.
  9. Blattberg, Eric (2014-06-26). "Funding Daily: Big-money Thursday". VentureBeat. Retrieved 2021-04-07.{{cite web}}: CS1 maint: url-status (link)
  10. Tergesen, Anne (2019-09-02). "Some Companies Offer a New Benefit: Payroll Advances and Loans". Wall Street Journal. ISSN 0099-9660. Retrieved 2021-04-07.
  11. Crossman, Penny (2020-03-20). "Consumers seek early access to wages to soften coronavirus hit". American Banker. Retrieved 2021-04-07.{{cite web}}: CS1 maint: url-status (link)
  12. Isidore, Chris (2019-03-09). "Visa and PayActiv are now providing quicker pay for those who need it most - CNN Business". CNN. Retrieved 2021-04-07.{{cite web}}: CS1 maint: url-status (link)
  13. Crossman, Penny (2019-03-11). "Do paycheck advance apps improve financial health?". American Banker. Retrieved 2021-04-07.{{cite web}}: CS1 maint: url-status (link)
  14. "The derailment of California's payroll advance law". American Banker. 2019-09-20. Retrieved 2021-04-07.
  15. Opfer, Chris (August 1, 2019). "'Early Wage' Apps Aim to Disrupt Payday Loans, Two-Week Cycle". Bloomberg Law. Retrieved 2021-04-07.{{cite web}}: CS1 maint: url-status (link)
  16. Bantz, Phillip (January 9, 2020). "Fintech Startup PayActiv Hires Ex-McGuireWoods Partner as Chief Legal Officer". Corporate Counsel. Retrieved 2021-04-07.{{cite web}}: CS1 maint: url-status (link)
  17. Vanac, Mary (March 3, 2021). "OnShift innovations enable workers access to wages before payday". Cleveland Business Journal. Retrieved 2021-04-07.{{cite web}}: CS1 maint: url-status (link)
  18. Shen, Lucinda (August 17, 2020). "SoftBank lends WeWork $1.1 billion". Fortune. Retrieved 2021-04-07.{{cite web}}: CS1 maint: url-status (link)
  19. Crossman, Penny (2020-12-30). "Synchrony, PayActiv join CFPB's compliance sandbox". American Banker. Retrieved 2021-04-07.{{cite web}}: CS1 maint: url-status (link)
  20. Paoletta, Kyle; Nwanevu, Osita; Tharoor, Kanishk; Robins, James; Simons, Seth (2021-03-01). "The FinTech Industry Wants to Give Desperate Workers an Advance on Their Next Paycheck. It's a Trap". The New Republic. ISSN 0028-6583. Retrieved 2021-04-07.{{cite news}}: CS1 maint: url-status (link)
  21. "U.S. Hourly Workers Push to Get Paid Sooner". Bloomberg.com. 2020-04-01. Retrieved 2021-04-07.
  22. "Hancock Whitney Bank Offers PayActiv EWA Program to Business Clients". AiThority. 2021-03-07. Retrieved 2021-04-07.
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