PayActiv is tapping into the demand for employee payday advances by linking up with employers to offer the feature directly through payroll.

PayActiv’s growth is evidence of the strong demand for payday advance services. It’s a consumer trend that’s led to startups like Earnin, Branch and Even taking market share. Even and Branch work with employers while Earnin is direct to consumer. PayActiv, which launched instant pay advances last week, is trying to differentiate from competitors by becoming a full-service financial platform for employees that includes bill pay, savings tools, financial counseling and prescription discounts.

“[Employees] are struggling every day and, if they need access to liquidity, they need it immediately,” said Ijaz Anwar, co-founder and chief operating officer of PayActiv. “As far as employers are concerned, their value proposition is really through the holistic financial wellness that we provide.” 

The San Jose-based company, which was founded in 2012, can push employees’ earned wages to any Visa or Mastercard debit card, as well as any general purpose reloadable card, 24 hours a day, seven days a week. Anwar said it takes about five seconds on average for the funds to become available in a checking account linked to a debit card. Employees can get up to 50% of their earned wages as an advance, but they can’t exceed $500 per pay period. 

The instant paycheck advance feature, which uses technology from Fiserv and Visa Direct, is an improvement over PayActiv’s previous paycheck advance tool, which relied on ACH transfers that would be processed the next business day. PayActiv is not charging additional fees for the instant feature.

In order to drive revenue, PayActiv must appeal to employees and employers alike. Employers must decide to contract with PayActiv and offer it as a benefit, but employees are the ones who choose whether or not to use the service. There is no charge if employees decide not to use feature. If an employee does use the service, the cost is $3 per weekly pay period for each employee. For bi-weekly or bi-monthly pay periods, the cost is $5 per employee. The cost can be paid by either the employee or the employer, and Anwar said the company sees a mixture between those employers who pay in full, those who subsidize the cost and those who pass the cost entirely on to employees. 

PayActiv is available to users as an app or website, and many employers just embed the platform in their own apps. The financial counseling professionals and financial literacy tutorials are available through PayActiv’s online platform. For the autosave capabilities, Anwar said many employees prefer to think of their paycheck in units of time, so PayActiv allows them to set aside units of time instead of money. For example, if an employee sets aside one hour each week to deposit automatically into a savings account and makes $20 an hour, $20 will go into that savings account every pay period.

More than 500 businesses use PayActiv as a benefit for employees, including Goodwill and Walmart. The company markets its services to employers through web-based advertisements and attending trade shows. The company estimates between 30% and 40% of employees end up using PayActiv.

Despite the financial wellness tools highlighted by PayActiv, payroll advance companies recently have come under fire from regulators. In August, the New York Department of Financial Services, through a joint effort with 10 other states and Puerto Rico, launched an investigation into payroll advance companies to determine whether or not the fees required by these companies resembled those of predatory payday lenders.

“High-cost payroll loans are scrutinized closely in New York, and this investigation will help determine whether these payroll advance practices are usurious and harming consumers,” said Linda Lacewell, New York DFS superintendent, in a statement. “We will use all the tools at our disposal, including partnering with peer regulators, to safeguard consumers from predatory lending and scams that ensnare families in endless cycles of debt.”