One of the biggest developments in payroll in recent years is the rise of “on-demand pay”, also often called “earned wage access”. Earned wage access programs, which are built on the premise that workers should have access to their pay as they earn it, instead of when is convenient for employers to run payroll, have fundamentally changed how workers understand and interact with their own earned pay. Instead of a “black box” amount of money deposited into one’s bank accounts every two or four weeks, workers can now have access to an individually calculated net or “take home” pay balance the day, sometimes the hour, they earn it. They can monitor this asset to manage their financial obligations, to become more informed financial consumers, savers and investors, and they can easily access their earned pay from any account of choice.
One of the challenges of EWA is that it takes money to move money, so historically, the only business model that could allow for a “no-fee” EWA program was to require a worker’s pay to be transferred to a prescribed card or one specific captive account or program, as this allows the EWA vendor to receive a share of the interchange (the fees merchants pay every time a consumer swipes a debit or credit card) generated by that account, and to charge other fees through the card or account management process. This model provides working people choice, and offers a no-fee method to gain access to earned pay on an as-needed basis. As such, there is significant potential benefit for many workers in these models, but it imposes restrictions on the consumer’s choice of where and how to bank.
Importantly, Federal regulators have suggested that EWA programs should also allow choice in destination of funds. Forcing funds to a captive card or account would seem to go against this principle of choice. Regulators appear to value no-fee (or low-cost) financial services, and choice of destination, to respect existing financial relationships and minimize the risk that workers will become “unbanked”.
With this background, there are now two new ways for workers to access their own earned pay for no fee. One is a general purpose reloadable card and app that allows users instant, no-fee access to earned pay, provided they work for an employer offering the EWA platform and update their direct deposit to Friday.
Additionally, DailyPay also recently announced that their users now have the option of accessing their earned but unpaid income without any fee when using the 1-3 business day transfer option (via ACH). Universal, no-fee EWA – without a captive card or account – is a significant advance in the EWA space, as this offers users no-fee access to their earned pay without restricting their choice of bank or card account.
We have written previously about the growing evidence showing that EWA has empowered workers to transition away from expensive payday loans and overdraft fees, and the introduction of these new, no-cost EWA options into the marketplace can only enhance consumer benefits. Workers now have a no-fee method to obtain earned pay instantly, and a no-fee method to obtain earned pay at an account of their choice, all under the same umbrella.
 See how the CFPB discusses whether providers “provide EWA funds to an account of the employee’s choice”, online at consumerfinance.gov.