Technology-Driven Instant Pay Creates Opportunities for Employers

Payroll professionals should consider adopting instant pay methods as part of a broader workflow strategy and to adapt to a changing workforce, two payments experts said March 16.

Payroll has traditionally paid workers through banking, especially ACH transactions, said Michael Baer, president of Baer Unlimited. ACH transactions have their benefits, including their reliability, low failure rate, high payment limit, and low cost, added Anthony Peculic, vice president of product and technology for Marqeta.

While the ACH network will continue to be an integral tool for the payroll industry, it currently lacks the functionality and convenience that instant pay, also known as on-demand pay or real-time pay, can offer, Peculic said. Payroll professionals using ACH transactions as their only payment method also run the risk of having a single point of failure that could cause major workflow disruptions and compliance issues, added Baer. According to a 2024 survey from PayrollOrg, 73% of employers do not have an alternative pay method established in the event of a direct deposit failure, Baer said.

Baer and Peculic spoke at PayrollOrg’s Capital Summit conference in Arlington, Virginia.

Newer technologies have created faster financial transaction options that can benefit the payroll industry, said Baer. These methods provide additional “payment rails,” or systems for financial transactions, in much the same way that direct deposit and payroll cards established new payment rails in the past, added Peculic.

“In the US, we do not have a mandated rail, and one thing I often tell people is you can’t just pick one,” explained Peculic. “Why do we offer checks? Well, because not everyone is on direct deposit. Why do we offer payroll cards? Well, because not everyone wants to get a check.”

The most common payment rails used in the US include ACH transactions, FedNow, wire transfers, card networks, digital wallets, and blockchain, Peculic said. Blockchain, particularly stablecoin, offers near-instant payments and is becoming more regulated following the enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or GENIUS Act, he said.

“Stablecoin will not become a currency. Stablecoin, in essence, is an enabler,” Peculic said. “It’s something that I think will be important to payroll at some point. Why? Because it allows for complete transparency on transactions, where it’s been and where it’s going on the chain. But also, it allows money movement to be done pretty much instantly as well, potentially at a lower cost.”

Other countries and organizations have created their own payment rails that offer fast payment options, Peculic added. Some examples include the Society for Worldwide Interbank Financial Telecommunication, or SWIFT; the Singe Euro Payments Area, or SEPA, in the European Union; the Faster Payments System, or FPS, in the United Kingdom; Interac in Canada; and Pix in Brazil, he said.

The proliferation of new payment rails coincides with a rapidly changing global workforce, Baer said. More workers are becoming independent contractors, and employers are incorporating both independent contractors and employees into their workforces, he said. Unlike traditional employees, independent contractors, particularly those in in the gig economy, receive their funds almost instantly, he said.

“Payroll can help attract some nonemployee talent to organizations,” Baer said. “That’s starting to change, I think, how organizations are viewing payroll and viewing payments to workers in general.”

Instant payment options are particularly attractive for younger individuals just entering the workforce, said Peculic. Many of these workers consider instant pay or daily pay options as important workplace benefits, and even older workers are starting to use services like earned wage access as the cost of living continues to increase, he added.

“When [Uber] launched [instant payments], to be honest, they didn’t care about workers demanding this,” Peculic said. “They knew that they were in competition for the same worker that would work at Lyft, that would work at Instacart, that would work at DoorDash, or that in fact would do deliveries at pizza shops. So, you have to think of it that way. They leveraged pay as a means to attract talent.”