One of the biggest payroll shifts in recent years has been the rise of “on-demand pay,” also often referred to as “earned wage access.” Access to earned wages programs, which are based on the principle that workers should have access to their wages as they earn them, rather than when it is convenient for employers to manage the payroll, have fundamentally changed the way workers understand and interact with their own earned wages. Instead of a “black box” amount of money deposited into their bank accounts every two or four weeks, workers can now have access to a net or “net” pay balance individually calculated on the day, sometimes the hour , where they earn it. They can monitor this asset to manage their financial obligations, become more informed financial consumers, savers, and investors, and they can easily access their earned wages from any account they choose.
One of the challenges of EWA is that it takes money to move money, so historically the only business model that could enable a “no-fee” EWA program was to require the salary of a worker is transferred to a prescribed card or to a specific card. captive account or program, as this allows the EWA provider to receive a share of the interchange (the fee merchants pay each time a consumer uses a debit or credit card) generated by that account, and charge d ‘other fees via card management or account processing. This model offers workers a choice and provides a cost-free method to access earned wages when needed. As such, these models have significant potential benefits for many workers, but they place restrictions on consumer choice about where and how to bank.
Importantly, federal regulators have suggested that EWA programs should also allow choice of where funds go. Forcing funds into a captive card or account seems to go against this principle of choice. Regulators seem to value free (or low-cost) financial services, and choice of destination, respecting existing financial relationships and minimizing the risk of workers becoming unbanked.
In this context, there are now two new ways for workers to access their own compensation free of charge. One is a general purpose reloadable card and app that gives users instant access to earned wages at no cost, provided they work for an employer offering the EWA platform and update their direct deposit. until Friday.
Additionally, DailyPay also recently announced that its users now have the option to access their earned but unpaid earnings at no cost when using the 1-3 business day transfer option (via ACH). The universal and free EWA – without cards or captive accounts – is a significant advancement in the EWA space, as it gives users free access to their earned wages without restricting their choice of bank or card account.
We have previously written about the growing evidence that EWA has enabled workers to move away from expensive jobs. payday loans and overdraft fees, and the introduction of these new EWA options at no cost to the market can only improve the benefits for consumers. Workers now have a free method to get their wages instantly, and a no-cost method to get earned wages into an account of their choice, all under one roof.
 See how the CFPB discusses whether providers “provide EWA funds into an account of the employee’s choice”, online at consumerfinance.gov.