More Firms Offer On-Demand Payment Solutions
Inside Subprime: Nov 1, 2018
By Lindsay Frankel
Financial stress inhibits employees’ quality of life. According to a CareerBuilder survey, more than a quarter of workers aren’t able to set aside monthly savings, and 78 percent are just making ends meet, living paycheck to paycheck. Many of these Americans – an estimated 12 million annually – turn to payday loans when unexpected expenses arise. These short-term, small-dollar loans are often used to bridge the gap between paychecks, but low-income borrowers are rarely able to pay off these loans on time.
Now, a major employer–a global provider of human resources technology–has announced that it will introduce on-demand pay to its workforce. With this functionality, employees can request a payout of their earnings before a regularly scheduled pay period. Requests can be made via a mobile app, and money is deposited to a digital wallet. The Chief Strategy Officer at the firm said the company hopes to improve work life for employees through technological innovation. “Companies today are mindful of their employees’ financial and mental well-being and seek solutions that will enable their people to be productive and satisfied at work. [On-demand pay] may help alleviate stress so employees can focus on their work and not their finances,” he said.
On-demand payment solutions allow workers to access cash they have already earned without paying the exorbitantly high interest rates associated with payday loans. Employers who provide the perk may have a better chance of attracting talent and retaining employees in a competitive market.
The CSO pointed out that “traditional payroll doesn’t meet the real-time payment needs of a modern workforce,” and added that the new system would provide employers with more choices.
By providing a solution that allows employees access to their earnings at any time, the fir, is following a new trend in financial wellness. Companies have used other solutions to offer creative alternatives to payday loans for workers. In late 2017, Walmart announced that more than 1.4 million associates would be able to request earned but unpaid income. As technologies evolve, companies are becoming better-equipped to support improved financial wellness for employees, limiting the need for payday loans.