Unlocking Financial Freedom: The Rise of Earned Wage Access in Thailand

By Yuthadej Putamanonda , Co-Founder and Chief Commercial Officer, Mula-X

Thai version originally posted on Prachachart

While Thailand ranks as the second-largest economy in Southeast Asia, following closely behind Indonesia, a considerable portion of its population faces the challenge of living paycheck to paycheck. Within the dynamic fabric of Thailand's economy, more than 30 million employees earning less than THB 30,000 per month consistently navigate through complex financial challenges. This ongoing struggle with financial uncertainties presents a significant hurdle to stability and well-being for many diligent individuals.

Yet, amidst this complexity, a groundbreaking solution is taking centre stage – Earned Wage Access (EWA), also known as Salary on Demand. This innovative approach is becoming a source of hope, designed to address the ongoing challenges faced by households with limited resources, particularly those grappling with persistent liquidity issues.

EWA directly addresses the ongoing struggles faced by households with limited resources. It's not just about providing relief; EWA becomes a means for financial empowerment, altering the financial landscape for individuals managing the complexities of relying on each paycheck.

The Thai Dilemma

A startling number of Thai households lack emergency savings, with more than two-thirds burdened by informal debt exceeding their available funds. Compounding the issue, a misalignment between income receipt and expense timing exacerbates liquidity problems. At the same time, there is no government mandate on pay frequency; less than one-third of employers pay bi-weekly or less frequently, often misaligned with the payment frequency of essential household expenses.

Taking cues from global trends, notably the surge in EWA in the United States, where real-time pay is becoming the norm, Thailand is poised for a financial revolution. In the US, Gen Z, entering the workforce amidst the rise of gig work, demands faster and more frequent pay. This expectation shift extends beyond Gen Z, with a substantial increase in the overall workforce desiring same-day pay, reaching 79% in 2022 from 49% in 2018.

The Current EWA Landscape in Thailand

EWA providers in Thailand approach employers to integrate EWA as an employee benefit, which is a novel idea in itself, as many employers do not view EWA or employee benefits as a retention tool, unlike their counterparts in Southeast Asia.

The standard EWA modus operandi involves sharing employee data and sometimes automating connections with employer payroll systems. Employees can then initiate EWA draws through mobile applications. At month end, the employer reviews and processes payroll deductions on behalf of the EWA provider.

However, this process introduces certain risks, such as sharing sensitive employee employment data and possibly violating labour laws prohibiting salary deductions outside specified categories. According to the Labour Protection Act B.E. 2541, deductions can only be made for specific purposes, such as income tax, labour union dues, and debts with employee consent.

Innovations Shaping EWA in Thailand

In answer to some of these risks, several innovations have emerged that can maximise the benefits of EWA offerings whilst mitigating some of the challenges:

1. E-Wallet integration with EWA: Integrating e-wallets into EWA offerings allows for salary payment alternatives and enables fintech to create specific microservices for financially underserved employees. With employee consent, directing the total or a portion of the salary to the e-wallet system eliminates the risk of labour law issues, as the employer can pay the full salary without deductions on payday. EWA collections are then deducted directly from the e-wallet, offering more efficient processing and lower costs. Key benefits include faster EWA draw disbursements, possibly in real-time, into the e-wallet or a linked bank account, all while ensuring compliance with labour laws.

2. Streamlined Payroll Integration: Integration with popular payroll systems in Thailand streamlines the setup process for employers and accelerates employee activation when joining EWA programs. Off-the-shelf integration with the popular payroll system in Thailand allows a shortened setup turnaround for employers with minimum impact on existing salary processing. This integration ensures that the EWA platform has real-time access to an employee's earned wages, allowing for accurate and secure processing of earned wage access.

3. Mobile-Enabled Financial Services: EWA providers are extending their services to include mobile-enabled micro-financial services. From utility payments to micro-insurance and encouraging long-term savings, these services offer a holistic financial ecosystem. Directing full or partial salaries into e-wallets further enhances an end-to-end seamless experience when settling payments for the purchase of these financial services.

EWA as a Catalyst for Change

As Thailand wholeheartedly embraces these transformative innovations, the ascent of EWA signifies more than just a financial paradigm shift for individual employees. It is a beacon illuminating a transformative journey, heralding a profound reshaping of how the formal financial sector can serve the underserved.?

Beyond the immediate benefits of enhanced financial flexibility, EWA becomes a catalyst for broader socio-economic change; by empowering individual workers with real-time access to their earned wages, EWA fosters a culture of financial empowerment that transcends individual well-being, reaching into the core of the nation's social fabric by democratising finance.

In this era of unprecedented technological progress, EWA serves as a linchpin in the evolution of traditional employment structures, championing a more equitable and responsive system. As Thailand pioneers these innovations, it liberates individuals from paycheck constraints and loan sharks and propels the nation towards a future where financial freedom and personal prosperity unite.