- Gusto has launched free earned wage access for employees of its small business clients.
- The feature will be a welcomed benefit for small business employees, as conventional short-term finance options are expensive.
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The US-based fintech has launched a free earned wage access product—which gives employees access to their wages between paychecks—for its small business customers, per Business Insider.
Gusto aims to help small businesses manage all benefits for employees; its existing product suite includes access to health and dental insurance, a digital wallet and debit card, payroll functions, as well as access to certified HR experts. The fintech currently has 100,000 small business customers and is valued at $3.8 billion.
Gusto is already integrated into its clients’ payroll systems for its existing services, streamlining employers’ ability to offer earned wage access and letting employees easily access it. Gusto doesn’t charge employers extra to offer the product or require them to provide access to any additional employee information.
Additionally, the new feature comes as part of Gusto’s digital wallet, which also allows employees to set aside money in savings. That means existing users can start utilizing the feature without having to download an additional app, which could boost adoption.
The service gives employees a much-needed alternative to expensive conventional short-term financing options, and Gusto’s small business focus and wide range of services offer it a competitive advantage.
Conventional short-term financing options are often expensive. Giving employees access to their earned wages reduces their need to go into overdraft or take out payday loans, which are both associated with high interest rates: Payday lenders charge interest of as much as 400%, which often prevents borrowers from repaying in full and leaves them in debt for longer than anticipated. Moreover, regulations for payday lenders have been rolled back, meaning they don’t have to follow the same rules as banks to check that a consumer is eligible for a loan.
Early salary products are heating up in the fintech space as an alternative to costly loans, but Gusto stands out due to its target market and breadth of additional products. A number of other fintechs offer similar services, though players like Dave and Earnin target consumers directly, while PayActiv and DailyPay focus on large employers.
Hence, Gusto can command its own niche within the space by catering to small businesses. Additionally, further expanding its already well-rounded offering for employees makes Gusto a better one-stop shop for all benefits companies may want to offer.
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