Walmart’s early pay app falls flat as some employees leave

Bloomberg

Three years ago, Walmart Inc. offered hundreds of thousands of its US workers a new perk to keep them from quitting. Employees loved it. Rivals copied it. Now Walmart has reached a conclusion: It hasn’t quite worked as expected.
The perk is an app that gave employees the ability to tap their wages before payday, along with a bevy of other tools that helped them save more and forecast their earnings. It was supposed to help employees feel less stressed while boosting retention.
But it turns out employees who often choose to get paid sooner turned over faster, a recent internal review found. That’s got the world’s largest retailer rethinking how it pitches the app.
Walmart’s mixed results illustrate the complexity of offering perks across a US workforce of 1.5 million. While rivals like Target Corp. and Costco Wholesale Corp. have boosted starting wages to at least $15 an hour, Walmart has declined to budge beyond the $11 floor it set three years ago, instead dangling benefits like college tuition for $1 a day and expanded adoption and parental leave.
For now, Walmart is analysing the ways it advertises financial-wellness perks to employees and hopes to focus more of that marketing on financial counseling or credit building.
To evaluate the app, Walmart studied 269,000 employees hired over a seven-month stretch in 2018. One result was instantly clear: The perk was popular among new employees. One-quarter of those eligible to enroll did so within the first 60 days of work. It’s since grown to be
Walmart’s second most popular
benefit, behind only the 401(k).
Walmart then took a closer look at those employees who took advantage of the on-demand pay feature every other pay period. Among those workers, if they checked the app less often, the retailer found that more than half were expected to quit within their first six months. For those checking the app more often, that number dropped to 30%.

“At the end of the day, most consumers don’t want access to their pay every day; what they want is financial stability,” said Leslie Parrish, a senior analyst at Aite Group. “So earned wage access is providing that in the short term but they really need a broader set of tools to become financially sufficient.”
The findings are important because where Walmart goes, many other employers follow. After the retailer debuted the perk in 2017, other major companies jumped to offer similar options, including the country’s largest traditional grocery chain Kroger Co., and Flynn Restaurant Group, the largest US franchise operator and owner of hundreds of Applebee’s, Arby’s and Panera locations.
For Walmart, the study presents a bit of a catch-22. The retail giant wants to ensure its workers are taking advantage of the app’s savings and budgeting methods. But it’s clear that allowing access to wages sooner was what drove adoption. The trick will be to convince more employees to regularly use the tools in the app that help with personal finances.
“Many times, HR and businesses start lecturing people, ‘You don’t know how to manage finances,’” said Safwan Shah, CEO of PayActiv Inc., one of the startups that helped Walmart offer the app. “If you don’t give them this tool then they won’t go into the app, because then it’s just a lecture on how to save money. And nobody wants that.”
In some ways, though, the need for budgeting and savings tools has never been more clear. About a third of US consumers regularly run out of money before payday, Aite Group found. Roughly 37% of Americans say they cannot deal with a $400 shortfall with the cash they have on hand.
The findings will also be shared with executives who oversee financial offerings to customers. Separately, Walmart has said it is creating a startup that could provide banking services for employees and the public.
“The key takeaway for Instapay should not be: Don’t offer it. The key takeaway should be: You have to offer it within the context of giving people good information,” said Jon Schlossberg, co-founder and executive chairman of Even Responsible Finance Inc., another startup behind Walmart’s app that provides the budgeting and savings tools. “They don’t need to use it that often when they are given good information.”