CHICAGO–Waiting for your paycheck is so 2010, according to one analysis.
Instead, a wave of fintech companies is “changing the traditional pay cycle, allowing people to tap into money earned before the next payday,” noted Bloomberg. “It's another example of how money management and movement are transforming, driven by advances in technology, a shifting economy and changing consumer expectations.”
For much of their existence, capturing direct deposit from workers at many CUs’ sponsor companies was considered a fundamental practice. But now changes are taking place in the way many people are being paid as changes also take place in how people work, especially in so-called “gig economy” jobs such as Uber, Airbnb and Etsy, noted Bloomberg.
Moreover, while nearly two-thirds of Americans are paid biweekly, “sometimes waiting for the next paycheck is problematic, whatever a person's income. Half of Millennials (and 38% of all consumers) say it would be difficult or even impossible for them to pay back a loan of $500 right now,” noted Bloomberg, citing recent Fiserv research.
No Surprise
Not surprisingly, a number of fintechs are stepping in to meet changing demands, including Payfare, DailyPay, Instant Financial and Earnin, which offer direct-to-consumer solutions or work as services from employers, Bloomberg reported.
“Earnin allows anyone with a job and a bank account to get paid the minute they leave work,” the report explained. “From the smartphone app, an earner snaps a photo of an electronic timesheet and Earnin deposits the earnings in the person's bank account. Instead of fees or interest, users are asked to tip what they think is fair and share the app with their friends and family. Workers at more than 50,000 companies, including Apple, Starbucks and Home Depot, have used Earnin, all without a direct partnership.”
In a recent wage analysis, Earnin found that Americans who are paid biweekly are 50% more likely to use Earnin than workers who are paid weekly, the report continued. “That's despite the fact that workers paid biweekly – the most common pay cycle – have a higher average income. The budgeting flexibility afforded to those paid once a week allows them to overcome unexpected financial shocks better than those trapped in a longer cycle.”