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Have you heard of ADVASA, the Japanese unicorn startup?
Founded in 2017, ADVASA today is a startup with an estimated valuation of 230 billion yen ($1.5 billion). It's pioneering a unique trend called Earned Wage Access (EWA) in the Japanese market.
EWA simply means "paycheck advance". It refers to the flexible delivery of earned wages based on the number of paydays.
Typically, services that offer EWA allow employees to withdraw a portion of the wages they will receive in exchange for a fee via a mobile app or online platform. On a traditional payday, they receive their paycheck, minus the money they've spent in advance.
The paycheck is what you get for all the work you've done. EWA platforms advocate that workers should be able to decide how often they want to receive it, which is why EWA has the word "access" in it. It's the idea that employees should have access to the money they've earned at any time.
Also known as "on demand pay," EWA services are said to increase financial inclusion.
The concept of having cash on hand when you need it in a hurry is often considered less risky than taking out a high-interest credit card or mortgage. A Harvard paper found that 28% of respondents said they used alternative financial services less after using an EWA.
According to ADVASA, about ⅓ of Japanese households have no savings to cover urgent expenses. For single-person households, nearly half are in that situation. This is the reason why ADVASA's main customer segment is temporary workers with unstable salaries or who are exposed to the problem of multiple debts.
ADVASA presents this service under the name FUKUPE. FUKUPE is the name of a digital payment service that acts as a corporate welfare system.
Here's how FUKUPE works.
Employees register their email, bank account, etc. with ADVASA. The system also records their work history. They then enter the amount of wages they want to be paid, and ADVASA sends it to them. The employer checks the employee's timesheet, subtracts the amount used from their existing paycheck, and pays the employee.
To summarize, FUKUPE is a platform that combines employee time management, EWA, salary management, and payment services. As a digital payment platform, it can be regarded as a kind of HR SaaS.
EWA is an emerging trend in the United States and the rest of the world.
According to one financial publication, the size of EWA programs in the U.S. has tripled in the last three years. Another showed that the volume of wages paid through EWA grew from $3.2 billion in 2018 to $9.5 billion in early 2020. Major companies like McDonald's, Uber, and Walmart have also embraced these systems. In one survey, 76% of employees said they would like to be offered EWA.
Considering that employees in Japan are typically paid once a month, or even once every two weeks, you can tell that ADVASA's product and business model is unique, even more so in a region known to have a conservative corporate culture.
"FUKUPE is a support system that allows workers to receive their earnings at any time within their working hours. Especially for non-regular workers such as part-timers, there is a great need for them to be paid for their work before payday in case they have an urgent expense. Businesses can meet this need in order to attract more job applicants, reduce turnover, motivate employees, and more." - Shunsuke Kubota, CEO, ADVASA (Source)
Shunsuke Kubota (久保田俊輔), CEO of ADVASA, graduated from Seijo University in Japan. He then joined the marketing department of JCB, the largest credit card company in Japan, where he got to learn about CRM and worked on a project to analyze/provide optimized information to individual customers based on their card purchase history.
He then participated in a headhunting business for corporate clients. Along the way, Kubota became interested in the HR system and working environment of Japanese companies, finding that he could try something new by combining it with fintech technology. This made him join ADVASA as a co-founder.
"While headhunting for companies in industries with mostly part-time workers, such as restaurant chains and apparel, I was introduced to recruitment, employee training, and onboarding. After researching how to facilitate hiring and improve workforce satisfaction, I discovered that there existed a structure that enabled companies to flexibly change the form of payment." - Shunsuke Kubota, CEO, ADVASA (Source)
In a 2019 interview with a Japanese radio station, CEO Kubota outlined three main directions for the company.
First, he said that FUKUPE should prioritize the convenience of workers, but also focus on automation technology and HR systems that benefit the employers who adopt them.
Next, he emphasized that FUKUPE should be committed to the topic of "cashless," while still complying with Japanese labor laws.
By focusing on cashless, FUKEPE aims to become a solution that allows employees to receive wages in advance not only through direct deposit, but also through prepaid cards and mobile payment apps. By partnering with the widely accepted apps like LINE pay in Japan, FUKEPE changes not only the traditional paycheck cycle, but the entire way people get paid.
Cashless is probably one of the main drivers for ADVASA's efforts to gain traction within the Japanese market, because one of the primary initiatives of the Japanese government is "cashless".
Japan is notorious for its preference for cash.
At one point, research showed that about 80% of payments were in cash. In 2022, Japan (51%) was second behind Thailand (56%) in the use of cash payments in Asian countries, according to U.S. e-payment solution FIS. In the same year, there was even a clause in Japanese regulations that required wages to be paid in cash in principle.
The Japanese government aims to boost the share of cashless payments, including credit cards, debit cards, and mobile payments, to 40% by the end of June 2025.
For the Japanese authorities, the cashless policy is significant due to the fact that cashless payments provide convenience, which stimulates consumption; reduces tax evasion, which raises tax revenues; and accommodates foreign tourists.
In line with this, the percentage of cashless payments in Japan has been steadily increasing. From 13.2% in 2010, the proportion rose to 32.5% in 2021. From 2023, regulations have been added to permit companies to pay a portion of wages to digital accounts such as mobile payments. This could make it easier to pay foreign workers and non-regular workers who have had difficulty opening accounts at Japanese commercial banks.
Given the nature of the Japanese startup ecosystem, we can assume that the growth of cashless trend and ADVASA could be aligned. Considering that fintech was one of the startup trends in Japan in 2023, and that the Japanese startup ecosystem is highly driven by the government, it's understandable that ADVASA's challenge was spotlighted in Japan and turned into a unicorn company.
(Reference - 2023 Japanese startup trends roundup)
After COVID-19, both the demand for cashless and the government's stance on it have strengthened. It's not just a Japanese phenomenon. ADVASA, an HR SaaS platform that reflects the EWA trend, is riding the cashless wave in Japan and even globally.
Again, I believe it's a matter of execution and patience to meet timing. It would be interesting to watch how ADVASA expands its business in Asia.
Written by Jinny (underdogs)
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