[co-author: Claudia Flores]
Paying bills on time is still a monumental task for millions of working Americans. The latest research shows that about six in 10 Americans are living paycheck to paycheck; thus an unexpected bill could send someone into a never-ending cycle of debt. A study done earlier this year revealed that over one-third (36%) of consumers say it has been "somewhat" to "very difficult" to pay bills on time.
The premise of Earned Wage Access is simple: give workers the option to access the wages they have already earned without waiting for an arbitrary payday.
According to a study conducted by The Aite Novarica Group commissioned by DailyPay, more than nine in 10 (95%) of those who were previously reliant on payday loans in any way either stopped using payday loans (81%) or reduced use (15%) after using EWA. The study also revealed that 88% had less trouble with bills and loan payments after using EWA.
To meet their basic financial needs, 12 million Americans resort to costly financial strategies, the worst of which include predatory payday loans yearly – a trend that is not slowing down. The payday loan market was estimated to be worth roughly $33.5 billion in 2021 and by 2028 is predicted to grow to $42.6 billion.
Most working people today need not only higher wages, but viable, low-cost solutions to improve their financial health. Recent laws in Nevada and Missouri passed with broad bipartisan support license Earned Wage Access (EWA) as its own financial product. These laws codify industry best practices, and create strong, first in the nation protections for EWA consumers.The most important of these ban late fees, requires disclosures if any EWA company requests a tip, and requires reimbursement of bank overdraft fees caused by an EWA provider in certain circumstances.
There are generally two types of EWA – consumer-directed wage access services and employer-integrated wage access services, and the new laws create separate licensing regimes for our industry’s distinct business models.
We were proud to be part of a broad coalition of local and national stakeholders in both states that worked multiple years to thoughtfully draft these laws. This is why they were passed with near unanimous support from both parties. Meanwhile, the expensive financial strategies and products that have plagued underserved communities for years, continue to do so today. There is no silver bullet that bans these products and fixes the problems that cause people to utilize them. But EWA and DailyPay in particular is a powerful tool in this fight.
The EWA industry has grown significantly in the last several years and continues every day in all 50 states in its mission of disrupting predatory industries with a safer and less costly product. Its growth in popularity with employees is not just because it saves them money, but because it provides them the dignity and mental health benefits of managing one’s own finances on-demand.
Nevada’s SB290, the country’s first bill regulating EWA products, and Missouri’s SB103, not only succeed in codifying the industry’s best practices, but it sets a uniform standard for any provider seeking to provide earned wage access to employees. These new laws also specify that EWA products are not loans or money transmissions and provide transparency to governments and the public to help this innovative industry grow.
Many employers now view Earned Wage Access as an integral part of their employees’s financial wellness benefits package. Importantly, ours is an inclusive fintech innovation that is offered equally to all employees, regardless of their creditworthiness. For example, on DailyPay’s platform, all eligible workers receive the same access to low-cost pricing and no-cost services and neither the pricing structure nor an employee’s access to their earned wages is based on their credit score or financial history.
With guardrails in place, in the form of thoughtful and collaborative legislation, Earned Wage Access can continue to grow and play a critical role in workers’ ability to pay bills on time, save for the future, and live better financial lives.