The election made it clear: Americans are concerned about their financial wellness and the economy. Too many families are navigating the fine line between stability and hardship. In fact, the Federal Reserve reports that 38% of Americans would struggle to cover a $400 emergency expense. A recent Harris Poll of state and local government workers sponsored by DailyPay found one-third reporting that they are having a harder time paying bills than this time last year.
For these households, timely access to wages they’ve already earned can be the difference between stability and economic insecurity. Enter earned wage access (EWA). It's a financial technology that addresses the needs of working people struggling to make ends meet. DailyPay’s EWA, for example, integrates with employers’ payroll systems, giving workers access to their own money as soon as they earn it. It's a revolutionary but simple concept, and it is disrupting a traditional financial system that leaves many low and moderate earning — as well as unbanked and underbanked — people falling through the cracks. What’s more, users don’t have to pay a dime to access their own funds, unless they want to pay an ATM-like fee to use an instant transfer option..
Despite the claims of detractors, the research commissioned by DailyPay is persuasive: EWA helps improve financial wellness. Unlike predatory loans, which impose compounding interest and debt cycles, DailyPay’s EWA model is a choice that empowers workers to manage their cash flow.
This is why we hear countless user stories about how our platform has allowed employees to bridge short-term cash crunches and get through challenging times. Our service is helping everyday workers break the cycle of debt that is brought on and perpetuated by predatory lending products.
As a product and industry created to help solve financial instability, we take seriously the accusations that our product could be radically abused or mis-used. However, in partnering with hundreds of employers across the country, this is simply not the experience that our thousands of users have. Instead, it is quite the opposite.
Clearly, a small percentage of people use our platform frequently when they have an emergency, because it is a low-cost or no-cost alternative to all other options available.
However, A Financial Health Network study exploring EWA as a liquidity solution found that 81% of users report no longer using payday loans after accessing DailyPay, and 79% of users report they never or rarely overdraw their accounts after using the service. While some folks seek to paint a broad brush against the entire EWA industry, claiming it perpetuates the debt cycle, our research and user data show that the users of our product overwhelmingly reject payday loans and credit cards when they have access to their own earned wages.
It's no wonder users report feeling more dignified when they can rely on the fruits of their own labor to meet their urgent needs, rather than racking up high-interest credit card charges and overdrafts or having to ask friends or family for money. EWA services don't only help users feel better about their financial situation, it can help them to make their financial situation better. In DailyPay’s case, this is done through features that support saving and the ability to meet with a financial counselor via the Coordinated Assistance Network at no cost, in addition to providing insight into their earnings, spending habits, and credit score.
The reality is that earned wage access is a solution to pay infrequency, not income insufficiency — yet issues related to the latter underlie many of the criticisms of EWA. But the truth is, if a significant number of EWA consumers do not otherwise have responsible access to short-term liquidity, where are they to turn? For the millions who depend on responsible EWA models to manage cash flow, EWA isn’t a luxury; it’s a critical financial bridge that helps keep families stable and communities strong.
That’s why six states — including the most populous in the country, California, through its Department of Financial Protection and Innovation — have established measures that provide commonsense regulatory frameworks for this emergent industry.
There is no time to quibble when Americans are turning to better options due to technology giving them earlier access to their own funds. The path forward for policymakers and regulators is not to stifle innovative solutions that offer consumers necessary flexibility. It should be recognizing how the financial landscape has evolved for workers, and supporting them in taking control of their finances on a timeline that works for them.
Ishena Robinson is Senior Manager, Communications & Public Affairs at DailyPay
