A full 35% of Americans with credit files have debt in collections. Astonishingly, 25% of households pay one bill late each month.
In 2017, underserved consumers spent $173.2 billion on fees and interest across five financial product categories.
Lower-income Americans pay 3 times as much for a checking account due to the array of fees that are forced upon them.
The most effective way to help American workers is to ensure that they have the ability to pay bills on time and avoid late fees. This is the equivalent of putting $1,000 back into your employees’ wallets every year.
In addition, paying bills on time will likely have a beneficial impact on their credit and financial wellness, and thus reduce stress and distraction in the workplace.
For example, if the mother of a newborn has access to an extra $44 each time she needs to buy diapers in bulk, she could save nearly $1,000 in a year vs. buying diapers in smaller quantities each time.
Read Eleanor, Marty, and George & Rhonda’s stories in this eBook that illustrates how important a daily pay benefit can be to blue collar employees trying to make ends meet.
We’ve compiled an eBook that illustrates how having instant access to earned wages could make a big difference in an employee’s financial wellness.
There are several versions of “instant pay”, and it has recently become a buzzy term with different meanings in the market. The original—and often times most common—reference is to how the gig economy companies such as Lyft, Uber, etc, pay their drivers. (For purposes of this article, we just Lyft as an example).
It is often heard at payroll and HR conferences “Hey, Lyft pays their drivers daily. Why can’t we do that through payroll?” While this is certainly a reasonable question, there are distinct differences between a gig economy instant payment and a daily pay option for a traditional employee.
The first clarification is that the vast majority of gig economy companies are based on a “marketplace model.” Marketplace companies such as Lyft match buyers and sellers, as opposed to sell products or services themselves. In this context, the buyer is the rider and the seller is the driver. When the buyer (rider) takes a ride, she uses her credit card to pay for that ride. A third party credit card payment processor (in Lyft’s case, Stripe) processes the credit card payment and then immediately subdivides the credit card payment into two pieces:
In essence, Lyft never even sees the full payment for the ride.
This is why “instant pay” for a gig economy worker is frankly quite simple. Payments are flowing directly from the consumer, to the credit card processor, and then to Lyft and the driver. It is one continuous flow of money.
In the traditional employer context, daily pay is obviously materially more complex. There is no single payment from a consumer that flows straight through to the employee. Said differently, Lyft drivers earn a split of the ride fare.
Conversely, your employees earn an hourly or salaried rate. In order for a traditional employer to offer daily pay, it must work with a vendor who can fund and remit the payment to the employee, since it’s not as simple as subdividing a credit card payment.
Last thing—Lyft drivers receive 100% of their pay instantly. This is the standard and where the world is headed. There is zero chance that daily pay will stop at some threshold less than 100%. That would be like saying cruise control is the final step in driving automation. Even if you as an employer prefer not to offer the full 100% of wages to your employees, you should make sure you work with a vendor who can go up to 100%, should you have to change your mind later.