Inflation is creating a more compelling argument for alternative payroll options, as more consumers seek ways to manage short-term cash flow.
"Given the price of items like gas and food, people are needing to manage their budgets more carefully," said Jeanniey Walden, chief innovation officer at DailyPay.
Visa, DailyPay and The Bancorp Bank this week launched a reloadable prepaid card that's tied to an earned wage access (EWA) feature, or a way for employees to access a portion of their salaries earlier than the traditional two-week pay cycle. The prepaid card is being launched as EWA firms report an
Called Friday, the DailyPay Visa prepaid card offers no-fee instant payroll transfers, along with access to a mobile banking platform that allows workers to track earnings and spending. Users can also make P2P transfers, locate no-fee ATMs and link to mobile wallets including Apple Pay, Samsung Pay and Google Pay. The card is also usable if the worker leaves the DailyPay employer.
DailyPay's clients include firms in hospitality, travel, health care, retail, supermarkets and human resource firms. DailyPay earlier this year
As many EWA products generally target lower-income Americans, the product category will become even more relevant in an inflationary environment or in potential recession, according to Francisco J. Alvarez-Evangelista, an advisor at Aite-Novarica.
"Tighter wallets, stricter budgets and rising costs affect the millions of Americans that live day-to-day, many of which have relied on EWA to get earlier access to their earned wages or to better manage their budget," said Alvarez-Evangelista. "It then becomes imperative that EWA remains a safe, regulatory-conscious alternative for Americans looking at getting paid on their own terms."
While there are signs inflation is stabilizing, it's still at a near 40-year high, and prices are rising fast enough to create downward pressure on wages, according to the
Rising costs have motivated more hourly workers to enroll in programs that give them a portion of their earnings ahead of their normal pay cycle.
Seventy-five percent of hourly workers have struggled to pay expenses this year, according to a poll DailyPay conducted in June in partnership with Harris and Funding our Future, a retirement planning association. Hourly workers struggled to pay for groceries (40%), gas (48%), utilities (40%) and rent/mortgage (34%) this year.
The stress of these higher prices is causing people to check their account balances more often, Walden contends. An internal analysis found DailyPay users were checking their account balances an average of eight times per month this year. About 62% of consumers in general check their account balances less than twice per month, according to
"As people finish their shift, they can access this app to see how much money they have, if they can buy groceries or what their bills look like compared to how much money they will be earning," Walden said.
The EWA industry was already expanding quickly before the pandemic and inflation. The value of wages accessed through EWA services increased from $3.2 billion in 2018 to $9.5 billion in 2020, according to research
That growth has led EWA to become a recruitment tool for employers, who have used it to address staffing shortages and to appeal to gig economy and other part-time workers. For example, firms such as OTG Management, which manages quick-serve restaurants at Toronto's Pearson International Airport, is using EWA cards in its recruiting; and
DailyPay is aiming the new prepaid card at underbanked and unbanked users in particular, since it may not be as easy for these consumers to monitor their account balances. "They really don't have access to a debit card or a bank account," Walden said.
Payment firms have increased their focus on providing short-term liquidity for consumers in recent months, leaning into worries about an economic downturn. Buy now/pay later lender
"No one wants to wait to get paid anymore, neither workers nor businesses," said Ralph Dangelmaier, CEO of BlueSnap, a payment platform. "An infrastructure that facilitates the quicker movement of money could benefit marketplaces and merchants as well."
While EWA services are generally free for workers, the attached payment cards generate transaction revenue.
"EWA providers have prepaid cards or checking accounts with debit access to ensure that all workers have an account to receive funds," said Sarah Grotta, director of the debit and alternative products advisory service at Mercator. "The competitiveness of the EWA market is driving down the fees to access payroll funds early. The interchange derived from prepaid cards helps to provide another revenue source."
