A few years ago, Fintech was introduced as a future of finance but at that time, it was just an unfamiliar term among financial services. By this year, Fintech, with blockchain integration, has witnessed a significant rise in the number of users and is predicted to reach $309 billion by 2022 with a 25% increase each year. Currently, Fintech is considered as a driving force for many industries, for example, Payroll Fintech - a brand-new Fintech innovation- is an emerging trend that can change the Human Resources industry. Nowadays, most large global businesses decide to hire a third-party organization to provide payroll management services, while SMEs have their own department (including 2-10 people) for checking payroll. However, companies that have international workers face various difficulties in tax regulation, huge and complex payroll data from different working shifts. Complex payroll data can lead to uncontrollable issues and mistakes. So, Payroll Fintech is introduced as a great solution to tackle a wide range of issues in traditional payroll. Now, let’s find out why businesses should apply Payroll Fintech instead of the traditional payroll methods.
1. What is Payroll Fintech
Although the majority of people think that payroll functions are simple, the actual system behind it is complex. Payroll is not only about paying monthly wages for employees but also about managing tax documentation, withholdings, and following payroll laws. The payroll system is quite manageable in local small or medium businesses. However, with large companies that include a huge number of both local and international workers with different shifts (part-time, full-time, remote, overtime, etc), checking such complex payroll data can cause inaccuracy.
While the payroll methods used in the 70s and 90s are direct deposit and modern payroll software such as Paycom, 2021 is the year for Payroll Fintech. Normally, with a traditional payroll system, employees have to open a bank account that the company requires, then wait for the physical checks at the end of each month. However, Payroll Fintech, which is integrated with blockchain technology, provides employees more control over their paycheck data with on-demand paychecks and several advantages. According to the Ceridian survey, 78% of workers agree that accessing on-demand pay with no extra cost will increase their loyalty toward employers, while 80% of workers prefer automatic payment as soon as wages are earned. That’s why this new Payroll method is expected to be universally used for businesses.
2. Why should businesses use Payroll Fintech
Payroll Fintech has several improvements compared to traditional payroll so that it can attract a huge number of users, especially international businesses. Here are 3 reasons why a business should consider using Payroll Fintech.
a. Real-time payments
Nowadays, not only other industries such as banks but also Fintech are beneficial by real-time payment. Especially, the user's experience in the Payroll industry is immensely improved by frictionless interaction and fast transaction with the latest innovation- Payroll Fintech, which is built based on blockchain technology. Real-time payment, also known as immediate or instant payment, is growing vastly since there are more and more customers who have expectations of on-demand pay services. With Payroll Fintech applications such as Wagestream, customers find it easy to track their earnings, access earned wages, build budget planners with their salary, and have free access to several financial education tools. Additionally, it allows users to check their wage-related data every time they want, instead of waiting for the end of a month. Meanwhile, when a company uses a third-party payroll organization to do the paychecks for them, it’s hard to keep up with each employee's payroll data on a daily basis since payroll is not only about paying wages but also about counting taxes or extra expenses for overtime, etc. As companies need to have time for data organization, classification, and processing, workers get paid once a month and only see physical paychecks at the end of the month or the beginning of the next month. So, Payroll Fintech can satisfy users with on-demand payroll checking instead of receiving paychecks once a month that normal payroll systems provide.
b. Crypto payroll
Currently, cryptocurrency is the hottest trend in the blockchain community that leaves a huge influence on the economy. The number of people who hold cryptocurrencies is increasing day by day. Then, knowing how potential the niche is, some start-ups have introduced Payroll Fintech platforms with crypto payment options. The addition of crypto payroll brings enormous benefits for receivers due to the rapid rise of cryptocurrency popularity. Crypto provides several advantages that businesses should consider using as payroll options:
- Global reach and border-cross free
- Stablecoins reduce volatility
- Highly security
- Opportunities when joining crypto communities
- A wide range of crypto choices
Although cryptocurrencies are the new term for the HR Tech space as it is not widely used, paying wages with crypto is extremely convenient and suitable with global companies that have international workers and freelancers. This payment method is also a proper factor to enhance workers’ satisfaction, royalty, and commitment towards their company. However, due to complex regulations on taxes, wage payment laws, compensation, or retirement funds, crypto payroll has not been universally applied as the main payroll option yet. Consequently, some Payroll Fintech applications such as Papaya allows companies to offer part of salary payment (up to 30%) in Bitcoin, Ethereum or other popular cryptocurrencies. So, by using Papaya, companies are able to follow the tax regulations while still providing their workers crypto payment options.
c. Payroll Fintech for credit
Along with receiving crypto payments and on-demand wage checking, users can make use of Payroll Fintech platforms for credit. Our lives revolve around credit and having good credit is a sign of a better financial future. Evaluating whether a credit is good or bad relies on credit scores, with several data points such as income, assets, etc. So, unlocking payroll data in Fintech is a reliable source to prove the financial situation of an individual. It provides a more complete financial picture of a person, then banks can offer them interest rates and other loans based on their ability to repay it. Additionally, when sharing payroll data for Fintech providers, they will have financial tools to help users build and choose suitable loan plans or optimize incomes from different earning streams.
3. The future of Payroll Fintech
Payroll Fintech is in its early stages as the technology behind it- blockchain is booming recently. Although Payroll Fintech is far from perfection, it has a huge potential in the Payroll industry. By solving the most concerning issue, which is on-demand paychecks, Payroll Fintech has left a strong impression on users. And with several advantages it brings, such as providing crypto payment options or proving financial situation for credit, Payroll Fintech is going to explode soon.
If you are wondering about how to build your own Payroll Fintech application, please don’t hesitate to contact us. SotaTek is a leading software development company that provides Custom Software Development and Consulting, such as Fintech Software Development Services. Our skillful financial software developers and professional expertise will help you to build a suitable road map for your Payroll application with blockchain software development integration. Let us be your trusted partner in the journey of taking over the Fintech market with the implementation of software development solutions.