MONTREAL — A growing number of Canadian companies are setting their sights on fintech products that would give workers instant access to their earnings—a trend that could upend longstanding practices around how employees get paid.

One of them is Humi, a Toronto-based HR software company that offers payroll services for small- and medium-sized businesses. In an interview this month with The Logic, Humi co-founder and president Kevin Kliman said the company hopes to eventually offer its users the ability to spend their earnings in between pay periods, in addition to other financial products built around employee compensation. 

“It’s extremely archaic that people have to wait two weeks to get access to the funds that they’ve already effectively earned,” Kliman said. “We know every day that you’ve worked, probably every hour.”

Humi’s product aspirations mirror an announcement last week by Minneapolis-headquartered, Toronto-run HR software provider Ceridian, which launched a program in Canada that allows employees to spend earned but undisbursed wages through a specialized pay card. Saskatoon’s 7shifts, which focuses on the restaurant industry, also has plans to make early wage access a feature of its platform.

Other companies targeting a similar market include Payfare, a Toronto-based company that raised $75 million in an IPO earlier this year. Payfare’s product allows gig workers for platforms like Uber and DoorDash to get instant access to their earnings, but the company also has ambitions to expand to other markets, such as Airbnb renters and social media influencers.

The companies have spotted an opportunity in the fact that the vast majority of workers have to wait weeks to get paid. Unlike payday lenders, however, payroll companies like Ceridian and Humi have access to reams of data on the business to whose employees they are loaning money, allowing them to offer the borrowers far better terms.

Analysts believe the market could be highly lucrative, disrupting a massive payday-loan industry that can cost borrowers more than 400 per cent in interest on an annualized basis. “Today’s standard scheduled payroll practices leave many workers unable to meet financial obligations,” Mizuho Americas managing director Siti Panigrahi wrote in a June report on on-demand pay. “The number of payday loan storefronts outnumbers the number of McDonald’s franchises in the U.S., which validates the need for immediate access to wages.” 

The terms of the on-demand pay products will be critical in differentiating them from payday loans, said Anil Verma, a professor at University of Toronto’s Rotman School of Management who specializes in industrial relations and human resources. For example, companies charging workers fees for early access to their wages or selling their financial information to third parties could ultimately be harmful to the users of those products, he said. Ceridian, to take one platform, doesn’t directly charge customers to use its product; instead, it makes money from fees charged to merchants when customers use Ceridian’s card to make purchases.

In addition to on-demand access to wages, workers might also be able to trade unused benefits such as accrued vacation time for cash, or use it as collateral in a loan. “That accrued time off has tangible cash value,” said Kliman, adding that Humi is exploring products along those lines.

Humi and Ceridian’s plans reflect a changing reality for tech companies that deal with large amounts of customer cash: many of them, eventually, become banks of a certain kind. Shopify, for example, leverages its existing relationships with businesses, in addition to data it has about those businesses, to offer loans through its Shopify Capital arm.

Kliman said Humi wants to further build its core business—he said the company is currently generating $5 million in annual recurring revenue from more than 4,000 businesses that use its platform—before expanding into fintech products. Still, such worker-focused products expand the potential user base for companies like Humi, which count employers as their main source of revenue.