I agree. The up front regulatory & capital requirements might be similar to starting a bank.
Perhaps the traditional banking lending product that matches this idea is "unsecured personal loan". Traditional bank would need functions to assess credit risk of loan applications, handle disputes, chase up loans in default, offer assistance to borrowers in financial hardship. Also need a way to obtain capital to lend.
Not obvious to me why a business that is not already a bank would want to take on some/all of these functions to offer loans to employees.
Also, there is increased potential to create messy situations by combining employer:employee relationship with lender:borrower. E.g. current economic environment where companies have massive drops in revenue and need to lay off staff. If employer lays off staff who have borrowed money from employer, quite unlikely that loan will be paid back. Perhaps situation is structurally more risky (due to correlated risks that impact employer and employee) than if a third party (e.g. a bank) was lender. Similarly if employee has borrowed from employer but is fired.