According to a report published on January 28, 2024, by CNBC, the rising popularity of these programs, which let customers access part of their age in advance of payday, in a few cases for a fee,.
The CNBC report quotes specialists and customer supporters who say that these programs offer benefits, such as quick access to money in crises, but can occasionally share the qualities of high-cost debt, such as payday loans.
Further, CNBC said that “when used correctly, it’s great,” said Marshall Lux, a banking & technology proficient and former senior associate at Harvard University.
Nevertheless, Marshall mentioned that misuse by customers and high fees can turn EWA programs into “payday lending on steroids,” specifically since the industry has extended so rapidly.
Future in report CNBC said that the employer-sponsored EWA programs will let workers access $9.5 billion in 2020, up from $3.2 billion in 2018, citing data from consulting firm Datos Insights. That same data presented transactions flying from 18.6 million to 55.8 million in the same duration.
Steep fees and user reliance “are kind of the shadier side of the business,” said Thad Peterson, strategic adviser for Datos Insights, who added that this signifies “the exemption, surely not the rule.”
Thad said a key concern is that customers can use several apps at the same time and take on more liability than they can pay back. These uses “can end up in the black hole of payday lending,” he said, and “you can’t get out of it.”
In the meantime, PYMNTS Intelligence has found that earned wage access can make a main difference to customers who live paycheck to paycheck, a group that now includes almost 60% of the United States population.
As per National Diplomat sources, these are people who can use emergency funds, with upwards of three-quarters saying they used a significant percentage of their saved income on big spending at least once.
EWA offers these customers another way to take on more debt, Rob Nardelli, director of commercial banking and business development at on-demand pay provider DailyPay, said in an interview with PYMNTS last June. “They’ve earned the hours and wages. EWA just gives them access,” Nardelli said.
