Times of rampant high inflation, such as that we are living in now, affect consumers and businesses in various ways. But one segment that is typically most adversely affected by inflation are workers who are paid an hourly wage. How can earned wage access make an impact?
As inflation forces difficult spending and budgeting decisions in households across the country, this demographic is among the hardest hit. One study conducted in July found that about half of hourly workers did not have any emergency savings at all, and nearly 80% had less than $500 tucked away. Only a small percentage of workers have seen their wages outpace inflation, according to research.
This is why it is critical for employees to have on-demand pay access in order to better manage their cash flow. And it’s also important for employers to offer this service, which plays a large role in employee retention and satisfaction. To learn more about earned wage access, PaymentsJournal sat with Darren Cho, VP of Product at DailyPay, and Steve Murphy, Director of Mercator Advisory Group’s Commercial and Enterprise Payments Advisory Service.
DailyPay partners with employers to enable employees to instantly transfer money between pay periods that they have earned to any bank account for a small fee, with 100% of their net pay earned up to that point available. Most of the employers it partners with pay a large segment of their workers on an hourly basis. The firm also recently created a Digital Wallet called Friday, which comes with GPR Visa card and companion mobile app. Users can download the Friday app to receive the Visa card, and immediately access their earned pay without transfer fees by connecting direct deposit to Friday in a single tap.
Darren said enabling easy and instant access to earned pay is vital for the financial wellness of hourly and gig economy workers.
“A lot of working Americans are living paycheck to paycheck, especially hourly workers,” said Darren. “Their income is often unstable and unpredictable, so it’s really easy to run into an overdraft fee situation or face late fees. And the inflationary environment makes it even worse. That’s why we believe workers should gain full control over their pay, and access what they earned without fees..”
Murphy asked about the new Friday product and where it sits in the wider DailyPay ecosystem.
Darren responded that for any employer that partners with DailyPay, its employees can always instantly transfer funds into their existing bank account. The firm is hoping to entice some employees to switch their direct deposit to Friday to take advantage of some of the perks, including the no-fee transfer. Friday also provides digital tools to help its users manage their money. For employees working for a DailyPay partner, Friday shows the real-time balance of their earned pay, together with the latest card balance, and allows instant transfer of the earned pay without fees. . This ultimately reimagines what the typical “payday” is, Darren noted.
“We believe Pay Balance is the employee’s own money. Friday enables them to access it instantly without fees; effectively making every day a payday. There are a lot of hourly workers that really cannot wait until payday to solve their financial problems,” he added.
Increasing Employee Wellness and Retention with Earned Wage Access
Helping people with their financial wellness not only benefits the employee themselves, but also the employer. Cho observed that there is a direct link between employers positively engaging their workers — such as by offering financial wellness tools — and employee retention.
“There has been an enormous focus on employee retention during the past few years,” said Cho. “Different employees have different sets of ideas about how and when they want to get paid and how they want to manage their money. Offering them flexibility in this area increases employee engagement and satisfaction.”
Cho added that it is not just younger workers that are taking advantage of DailyPay’s on-demand wage access services, but those across many different age demographics, which may come as surprising to some.
“What we are seeing in studying our user base and conducting surveys about who is using the service is that it goes beyond just one age demographic,” he said. “Older age groups are also represented in both the DailyPay and Friday user base, we have found.”
The user base also extends across all income levels, not just lower-income workers.
“Surprisingly there are some users that are in the six-figure income level,” Cho said. “They are a minority, but they do exist. The ongoing inflationary pressure is great irrespective of income levels.”
Seamless Integration With Employers
A key aspect of DailyPay is an easy integration with its employee partners without disruption to their existing processes and technology infrastructure, noted Cho.
“How does the employer add this service to their list of benefits and how does the employee access it?” Murphy asked.
Cho responded that integrating DailyPay involves no process or configuration changes on the employer’s end.
“We know that HR and payroll process are very complex, so it’s designed that we do all the integration work on our end,” he added. “It does not introduce any changes for the employer’s payroll configuration.”
Cho also said that DailyPay provides its employer partners with marketing materials so they can let their employee base know the service is now an available option to them.
“We are trying to make everything as easy as possible for the employer,” he said.
Murphy agreed that “it’s a real key to make things easier for the business and eliminate friction” in getting adoption of any new employee benefit service.
