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Payroll is one area of business that’s been ripe for innovation and disruption for a while now. On the surface, it may not look like something that really requires any major changes. After all, it’s worked well enough so far: You work your hours and you get paid every fortnight or month. The machines kept ticking without a lot of complaints despite the current system not being entirely ideal for the large part of the population that lives paycheck to paycheck.

Earned wage access promises to be the shakeup that the payroll system has perhaps required for a while now. The premise is simple: EWA providers posit that the workforce should be paid on demand, and a good portion of the workforce agrees with that.

To find out just how well the industry has embraced this payroll model and the startups championing it, we spoke to three investors, and they painted a picture of a fast-growing industry that’s still trying to find its footing.

Jennifer Ho, partner at Integra Partners, pointed out: “In 2021, over $1.13 billion was raised by startups offering EWA products. Due to changing lifestyles, rising costs of living, and the residual impact of COVID-19, many small and medium-sized enterprises have grown dependent on EWA. Particularly in Asia, EWA has picked up steam this year.”

But there is a significant number of hurdles that EWA startups will have to surmount to earn the trust of employers and employees alike, Ho said. “It is important to remember that EWA companies are typically B2B2C businesses, and face the same challenges that many B2B2C businesses face: the decision-maker and the consumer have different incentives and priorities.”

Despite a few different EWA models seeing varying success at the moment, Ho believes the model that places the cost on the employer is the one that will win.

“From a financial inclusion perspective, models where the employer — rather than the employee — bears the cost have the stronger social impact case. What we’ve found is that EWA startups typically service a mix of customers across both models, where the employer pays in some cases and the employee pays in others. Broadly speaking, an EWA startup’s goal is to prove its value as an employee welfare and retention tool. For accounts that start on an employee-pays model, employers will get a better understanding of how EWA improves employee productivity and retention over time. This will be a key driver for encouraging employers to pay for a fixed fee per disbursement, ultimately facilitating the transition of the account to an employer-pay model.”

Despite concerns that the EWA technology is replicable, Aris Xenofontos, partner at Seaya, is of the belief that EWA is a defensible business model because the moving parts are complex enough to deter corporations from coming up with their own solutions.

“The technology is evidently replicable. However, the pain of integrating with the various payroll systems, and the lending/balance sheet side of the business, makes it hard for a larger company to do this in-house. We don’t see in-house development as a big competitor here.”

Read the full survey to learn which sectors earned wage access is most popular in, what investors look for in an EWA startup, and the best way to pitch them.