How technology is transforming payroll for vulnerable communities

Josep Maria Elias is Chief Strategy Officer at CloudPay, the specialist global payroll provider

To those operating outside of these industries, the worlds of payroll and payments may, historically, have seemed relatively straightforward and static. In reality, the expansion of data and technology within these fields is now creating a profound and far-reaching impact particularly in supporting vulnerable communities in countries around the world. Here’s how.

The aforementioned perception of this market is perhaps unsurprising; the sector has been slow to adopt and benefit from the rise of technology. Traditionally, payroll has meant – to most –receiving payment for work, which is crucial since the vast majority of people work to get paid.  But in most cases, particularly in rural or ‘unbanked’ communities, payroll has historically meant little more than receiving cash in hand, being tied to employers, and potentially facing a lack of financial freedom or flexibility.

However, the growth of technology and access to the internet is enabling many of these communities to thrive and gain financial independence as a result of better access to pay. The growth in digital ecosystems and the rise of new, more agile financial and fintech firms offering instant and traceable ways to send money have driven this change. Regulations such as the revised Payments Service Directive (PSD2), have helped create a standardised environment that simplifies cross-border payments for banks, fintechs, and employers.

In turn, the development of this wider ecosystem has facilitated the rise of digital payments, which are providing a balance between traditional legacy banks, and the constantly evolving world of cryptocurrencies. They enable the fast, agile transactions of the latter, with the regulation, security and transparency of the former. Digital payments are getting more of a foothold in day-to-day life and will only continue to develop as the world becomes more interconnected and digitized.

For pay, this new environment has changed the market. Now, due to the rise of the aforementioned ecosystems, and new ‘pay-on-demand’ or earned wage access (EWA) models, every day can become a payday. These systems enable access to accrued earnings, as and when they are needed. This approach not only supports those on low incomes but also helps employees manage unexpected financial challenges, mitigating potential impacts on their finances and other aspects of their lives. In addition, it can also help employers to facilitate their employees’ access to pay on occasions when there are issues processing payroll.  

Providing better access to pay not only empowers employees with greater degrees of financial and personal freedom, reducing their dependency on employers, and specific ways of life. The growth of this field isn’t just benefitting individuals, but organisations too. Digital ecosystems and payments help firms meet the demands of their increasingly globalised customer base, allowing them to build truly global workforces less impacted by currency fluctuations and borders.

We’re still in the early stages of the evolution, and it will take years, if not decades, to see the full development of this more accessible world come to fruition. The traditional firms that have and continue to dominate the financial world have deeply embedded processes and cultures that take time to change, but we’re already seeing the benefits of this increasingly digitalised approach to pay, particularly in peer-to-peer transactions.

Within our organisation, we’re working closely with communities in East Africa to provide access to pay for unbanked communities. The continent as a whole is the global leader in mobile money, and accounts for 70% of the $1.26 trillion market. With approximately 370 million unbanked people and 763 million mobile phones in Africa, there is enormous potential to integrate pay-on-demand services. Such integration would allow workers to access their earnings directly through their mobile devices, significantly alleviating financial hardships and improving their economic stability.

This is just one example that illustrates how technology in payroll being supports vulnerable communities, with many others, also enhancing lives. While payroll and payments may have been undervalued historically, their true potential is now only just emerging, promising a future where financial inclusion and stability are accessible to all.

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