25 May 2022

Jaspal Randhawa ChMCIPPdip EMEA head of products at OneSource Virtual discusses the growing trend of fintechs partnering with payroll software providers

Payroll has traditionally been viewed as a back-office process. However, over the last few years, the emergence of technology, such as APIs (application programming interfaces), is allowing two applications to talk to each other. Much like bank transaction data in the late 1990s, API access to payroll data was only possible once the systems that held the data started to move to the cloud. As a result, sharing data is much easier, thus opening payroll systems to a new world of possibilities, which could involve supporting the organisation’s strategy in areas such as managing financial transactions and providing data.


Why are fintechs partnering with payroll software providers?

Consider all the data payroll systems hold on individuals and the overall value of payment transactions that occur each pay day. It’s no wonder fintechs are keen to partner with payroll software providers.

It’s worth noting, however, that some fintechs are introducing their own payroll solutions, typically aimed at small and medium-sized enterprise businesses with less complex payroll requirements.

They’re therefore establishing themselves as employee benefits platforms, partnering with employers to be a one-stop destination. They’ll quickly onboard employers for payroll processing and offer additional features that can be added either as a bundle or separately. As these companies continue to innovate and expand their offerings, the impact on the financial lives of consumers deepens.


How are fintechs evolving?

Handling pay and disbursement transactions opens the gateway for fintechs to provide other products and services, such as:

  • earned wage access

  • savings

  • digital wallets

  • other financial products, made possible due to technology evolution.

This allows fintechs to offer products and services directly to employees via mobile apps, which provides a seamless experience.

Some fintechs provide employees with a bank account to receive pay into, by banking through their employer’s partnership with a payroll platform.

Wages can be deposited into this account faster than standard payroll processing and transfer timeframes as the disbursement is done internally. A debit card can be issued on top of these employee deposit accounts for immediate spend access, increasing the funds and associated transactions handled by the fintech.


Employee financial well-being

Adding banking access for employees at ‘point of pay’ enables improved budgeting, better savings habits and long-term financial health for workers. As consumers become smarter about their financial lives, they’d also become open to financial advising and goal setting. New partnerships are already emerging with financial advisers for coaching on investments, retirement and estate planning within fintech and multiple verticals — payroll can follow suit.

There are other benefits too, for example, verification of employment and income data, which is shared with the fintech. Consent is provided by the employee, who is now familiar with the concept of granting authorisation to a third party to access the relevant personal financial data. Again, thanks to APIs, this makes for a seamless experience, removing the need for human resources or payroll departments to complete forms manually, in scenarios where a lender would approach the employer directly to request confirmation of certain details.

Additionally, the data is submitted in the background, making this process quicker and much less intrusive where the employee is concerned. Therefore, verification of data should be seen as yet another form of employee financial wellness.

Although earned wage access has been around for a while, other aspects of financial wellness are still being developed, and deployment of these products is still relatively low in the UK. This will change as increased partnerships between payroll and fintechs take hold.


The benefits for employers

Employers can also benefit from the payment infrastructure offered by fintechs, revolutionising how companies pay their employees through their payment rails platform. Payment rails are the infrastructures that carry money between a payer and a payee. They connect banks and financial institutions with one another and allow money to travel between them. In the United Kingdom, money can be transferred through the faster payments network. The benefit of this is the additional time added back to the payroll calendar because faster payments are instant, whereas the Bacs processing method takes 2-3 days. These payments rails also provide multi-currency processing and distribution channels, so offer huge benefits for global payroll operations, particularly in those countries where traditional payment methods are prone to delays.

The fintech and payroll partnership is still relatively new, and there are many strategic opportunities available. It will be interesting to see the impact that this could have on the operational side of payroll so it’s definitely an area that’s worth watching. 



Featured in the June 2022 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.