Significant numbers of Americans live paycheck to paycheck, causing financial stress and limiting their ability to save.
For three in 10 American adults, income can vary from month to month, according to the Federal Reserve. And one in ten adults polled by the Fed said they struggled to pay their bills at least once in 2018.
Payday loans have often been a last resort for those who have a hard time paying their bills before their paychecks arrive.
Traditional payday loans, where consumers use a future paycheck to secure a loan today, are known for their high interest rates, opaque fee structures, and the tendency to trap consumers in pay cycles. costly debt.
But one a new wave of startups have emerged offering an alternative to payday lending called Access to Earned Salary (EWA), which is the ability to withdraw money you have earned based on the hours worked before payday.
Startups like DailyPay give consumers interest-free access to the money they’ve earned during a particular pay period. DailyPay partners with employers to offer their workers EWA through the DailyPay app and website.
And now DailyPay is launching a savings product, where its users have the option to send earned wages to their savings accounts, as opposed to their
Contributing to savings can be difficult for those who find themselves spending most, if not all, of their paychecks. But DailyPay hopes that by offering different ways to set up savings, its users can get into the habit of saving what they can, no matter how small.
The launch of the new Save product signals DailyPay’s ambitions to become a payroll platform, offering more than just access to earned wages.
With Save, employees can use their earned balance and transfer it directly to their savings accounts with the bank they use.
Unlike normal salary transfers, the Save product is free and can be configured in three ways: AutoSave for regular savings, DirectSave for one-time savings, and RoundupSave where employees can round up a salary transfer amount, say 18.40 $ to $ 20, and put the extra $ 1.60 in savings.
Founded in 2015, DailyPay’s first product was a payday advance feature that allowed employees to withdraw money they earned, without paying interest. The startup charges a one-time fee per withdrawal ($ 1.25 for the next day, $ 2.99 for instant transfers), which can be paid by employers, employees, or a combination of the two.
DailyPay integrates with its clients’ payroll systems to track the number of hours employees work. When an employee makes a payroll transfer, DailyPay pays the money and is then reimbursed by the employer on the normally scheduled payday.
In the payday advance market, there are two ways to reach consumers: directly or through employers.
Startups like Earn and MoneyLion have taken the direct-to-consumer route, where any consumer can register. The likes of DailyPay, Even and PayActiv are only available to employees at their workplace.
DailyPay is available to over 2 million employees in the United States, at companies such as Berkshire Hathaway, DialAmerica, and Six Flags. Many employees of DailyPay customers are paid by the hour.
It is marketed to employers as an employee retention tool. Companies offering DailyPay have seen an average 41% reduction in revenue for DailyPay users, according to the startup’s website. Adding the ability to get paid daily on a job posting, he says, can make applicants more likely to apply.
DailyPay’s 2018 Series B brought its total funding to $ 22 million from investors including Inspiration Ventures, Intercept Ventures and RPM Ventures.