Why Emerging Markets Need Pay Flexibility

by Ferdinand Dragtstra

This is the third in a series of blogs, where we look at challenges with pay and payments in developing and emerging markets.

Emerging markets face very specific issues driven by their socioeconomic situations. The lack of banking infrastructure in emerging markets poses a significant challenge for individuals in those emerging markets to manage finances and prepare for uncertainty and emergency expenditure. This can make employees lives more unstable, in which one problem can very quickly lead to another:b58f4768 82fb 4fd4 bb53 051815eac1eb

  • The cost of debt: poorer people tend to face higher costs for accessing credit and servicing debt, whether through fees, commissions or interest rates. This is especially the case in places where loan sharks are commonplace
  • Difficult access to funds: many people in developing countries, especially in rural areas, can’t easily access traditional banking services. This includes money transfer facilities where they can receive money sent to them by working relatives abroad
  • Lack of job security: if employees can’t get to work because of financial pressures, they risk losing their job, which then exacerbates their money problems
  • Lower welfare systems: a lack of social security incentives or initiatives that cover medical costs or school expenses can drive people in emerging markets to depend on credit and loans

How to give emerging markets pay flexibility

The answer to these problems is to build as much flexibility as possible into the world of employee pay. If employees are able to get paid at times that suit them, or get access to some of their earnings immediately if needed, they can avoid the disruption to their lives that debt can cause and insulate themselves from financial crisis.

 Essential to all of this is giving the individual employee independence and autonomy. If, for example, they have to go through a payroll department to access earnings outside of a normal payday, then they’re still relying on other people and processes, which can cause delays. Ideally, an employee should be able to access their earnings whenever they want, wherever they are, instantly, without the need to interact with any other stakeholders in the process.

 This is achieved through Earned Wage Access solutions such as CloudPay NOW. Employees can accrue wages day-by-day, or even shift-by-shift, in a digital wallet accessible through a mobile app. At any time, they can access the app, check how much they have accrued, and withdraw any amount they wish into their own personal bank account. This effectively gives them the freedom to set their own payday (or indeed multiple paydays throughout each month), and gives them debt-free and interest-free access to emergency funds – assuming they have accrued them – as and when the need for them arises.

 But this is just the start of what EWA platforms can do. Giving employees more control over their finances can help reduce their stress levels and improve their wellbeing both inside and outside of work. This can improve their productivity, and increase their job satisfaction and loyalty in the long-term. Furthermore, financial education materials embedded into the app can help employees become better-informed on their financial planning, helping them improve money management even further. Facilitating access to money will help level the playing field for everyone in emerging markets, reducing inequalities across territories and social levels.

 It’s also worth noting that all of these points are just as relevant for higher earners. Everyone can be subject to an unexpected cost at any time; the only differences are the scale of those costs and the sources of them. 

In summary

People on low earnings, especially in developing countries, are more vulnerable to financial shocks, and to them happening more frequently. That’s why pay flexibility through Earned Wage Access solutions can be transformative to people’s lives, both professionally and personally. By putting the power to access wages instantly into the smartphone in their pocket, it can help hard-working people in emerging markets get the fairer deal on money they deserve.

To find out more about CloudPay NOW, explore the platform in detail here, or get in touch with our team.

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