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Payroll Payments: Evolving from Banks to E-Wallets

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As the world became more interconnected, companies more global, and technology advanced at an accelerated rate, traditional banks found it challenging to keep up with the ever-changing needs of modern customers.

The gap between the banking industry and the quickly shifting demands of current customers and businesses only grew wider. So much so that to help push the banking industry toward the markets’ ever-evolving needs, the European Parliament implemented a revised Payment Services Directive (PSD2).

Aimed to increase competition and innovation in the banking sector by opening up access to customer data held by banks to third-party providers (TPPs) – such as fintech companies and other banks – the introduction of PSD2 was also driven by the need to increase competition in the financial sector.

By opening up access to customer data, PSD2 helped level the playing field and encourage new entrants to the market. And to stay apace with accelerated advancements, banking and money management had to modernize quickly as well, which led CFOs looking to improve their global workforce payments to face an even more nuanced market to navigate than before.

Many people use banks because of the high level of trust they have in bank-level security, even in how they protect data. But e-wallets also offer the same enhanced security features, such as advanced encryption and fraud detection, which mitigate the risks of data breaches and fraudsters. Some offer multi-factor authentication features, providing an extra layer of security for businesses that handle highly sensitive or confidential information – such as payroll. 

Below is a breakdown of what makes modern fintech solutions such as PSPs and e-wallets a superior solution to bank accounts when dealing with international payments.

Speed, Cost, and Ease

For businesses seeking to optimize their global payments operations – though not all created equal – e-wallets and payment platforms offer several key advantages over traditional bank accounts.

First, compared to traditional bank accounts, they provide faster remittances. This is mainly thanks to local payment clearing, which becomes much more effective when using alternative payment processes. Swiftness here can significantly benefit businesses operating in time-sensitive industries – a top priority when making global partner payments.

Secondly, e-wallets usually offer lower fees than traditional banks, allowing businesses to save significant amounts of money on international transactions. Some also offer more competitive exchange rates, further reducing costs.

Another advantage of e-wallets is that their desktop and mobile apps are more accessible, convenient, and flexible than traditional banks – with self-serve, user-friendly interfaces that make them easy to use. However, banks have made strides in that space in recent years.

Lastly, some providers allow users to fund multiple wallets in different currencies, all self-served and accessible under one single account/user, making them an attractive option for businesses that need to make frequent international transactions – with no concern for physical location. This feature can streamline cross-border payments and reduce currency conversion costs.

Picking Up Where Banks Left Off

If you’re wondering why banks can’t (or won’t) offer the same solutions, the answer lies in the relationship between the fintech industry and traditional banks.

Fintech companies fill the gap between rapid tech advances and lagging legacy banks by offering innovative solutions that are quicker, more efficient, and utilize improved cost control. It’s no coincidence that this formula is the essence of virtually every tech-led disruption we’ve seen in recent years.

Naturally, fintech firms are more flexible and adaptable than traditional banks, enabling them to respond promptly to their customers’ changing needs. As they each focus on their specific niche, solution, and target audience, they are significantly more adaptable than traditional banks, which are usually focused on a broader set of services.

Fintech companies leverage new technologies to develop more efficient business models that ultimately increase their clients’ yield. Fintech companies also have a considerable advantage in their ability to adopt AI technologies and manage vast amounts of data, which they can use to create tailored products and services for their customers.

Banks are Local; e-Wallets are Global

Banks offer a wide range of important financial services within a particular set of local regulations. They were built for local transactions. They are reliable for local compliance. They move slowly and deliberately along a narrow set of payment rails.

That advantage disappears when it comes to moving money across borders, even when those transfers are between two branches of the same bank. People might be surprised to find that moving money from their bank in one country to their bank in a different country adds so much complexity. That’s just the nature of banks.

An e-wallet provides the additional layer of global compliance and flexibility on top of bank accounts – making it ideal for global money movement. The e-wallet can mix and match between a wider set of banking rails and ensure compliance on both sides of the transaction.

Enter: Papaya Payroll Payments

Last month we officially launched Papaya OS – bringing payroll and payments into one platform, the first SaaS solution with technology and payment rails designed especially for global workforce payments.

We did that because even though payroll is almost every company’s biggest expense – the market still lacked a modern fintech solution designed for workforce payments. And, as any finance pro knows – payroll payments are not like any other payments.

So, yes, fintech advances brought forth more efficient treasury capabilities. More nuanced and improved, too. But not yet wholly optimized for the global workforce. To achieve that, more advancements were needed. That’s the gap Papaya payments platform and e-wallets close, taking it all to a new level of efficiency.

Click here to read more about what it means to develop a payments platform designed for global payroll.

Naturally, though, while many finance leaders are already enjoying our solution and see elevated efficiency, others are approaching us with some questions.

For the sake of this article, we’ll focus on two of the most frequent ones.

Is my money safe with Papaya’s e-wallet? And how confident can I be when using it?

Unsurprisingly, particularly against the recent backdrop of numerous bank failures, safety and confidence are the most important issues for anyone looking to onboard a new financial solution or service.

Here, the answer can be broken down into three levels:

First, the Papaya platform has bank-level security and holds multiple industry-leading security certificates.

Furthermore, because Papaya is a regulated financial service company via its subsidiaries, all client funds are segregated and safeguarded.

Thirdly, our e-wallets are held in an account at J.P. Morgan Chase, a tier-1 global bank.

Combined, these security measures provide our clients the peace of mind they are looking for in a fintech partner.

Why choose Papaya Global for payroll & payments combined?

As leaders in global payroll and payments, we are primely positioned to offer a more cohesive and streamlined process for global workforce management of all employment types.

This advantage stretches across multiple aspects of global payments. We dove into the details of what it means for you, your business, and your cross-border payments operations, in particular in two recent pieces:

1) What Happens When Payroll and Payments Are Split
2) You Asked, We Answered: Why Papaya Payments?

But, as we have your attention here, we quickly focus on two unique aspects that help paint the picture of what it means to finally bring payments natively into where it always belonged – the payroll process.

1) Since workforce data and payroll payments are interdependent functions, using Papaya also means your payroll data is built into the platform. This allows you to know exactly how much you need to fund each virtual payment account at any point in time, every cycle. Employers have complete visibility from payroll to payments, providing insight into every step of the process.

2) Another result is that sensitive payroll data does not exchange hands at any point as your workforce is being paid directly from the same system that calculates payroll – dramatically reducing the risk of manual error and payroll data leakage.

The financial flexibility provided by Papaya’s e-wallet is crucial when managing and paying a global workforce. Employers can manage all kinds of workers anywhere, securely fund accounts in seven major currencies, and deliver remittances in over 100 currencies, making managing a global workforce more efficient than ever.

Download our “Complexities and Solutions to Streamline Global Payroll Payments” report to gain a deep understanding of what life looks like with a Payroll OS – with a built-in payments platform, and what unifying them means for you.

Worth mentioning that the delicate payroll data does not exchange hands and is being paid directly from the system that calculates it. Therefore reduce the risk of manual error and payroll data leakage.