Earned wage access can keep workers on financial track

The completion of the Transcontinental Railroad in 1869 was a landmark moment in American history. This opened a new chapter in the country’s economic development as the connection of the two coasts by rail made the transfer of resources in the west to markets in the east easier, faster and safer. This technological marvel changed the country.

Fast forward about 150 years to today. Technology is doing it again.

Instead of tracks and a train, the latest transformative advancement is allowing Americans to collect their paychecks easier and faster. While early access to direct deposit payroll through some banks and credit unions has been available for several years, the new Earned Salary access platform and powerful Payment Rail are creating new opportunities for employees by enabling the instant transfer of funds from one bank account to another. making choices.

For millions of working Americans, the challenge of paying the bills often boils down to the time they receive their paychecks. The traditional one-week or two-week payroll cycle can present challenges for those on a tight budget. In our urgent digital age, some workers may view these payroll cycles as slow and inefficient – akin to roaming the country from before 1869. For many workers, receiving a portion of their earned pay immediately can be a huge benefit. The world doesn’t stop between paychecks. Bills need to be paid on time.

Earned Pay Access can empower employees to access a portion of their earned pay when they need to make purchases or pay bills. It can also help them avoid using high cost, short term loans to meet immediate cash flow needs.

Consumer Federation of America, A federation of non-profit consumer organizations, reported that one in five Borrowers of a payday loan default on their balance. This often results in a vicious cycle where individuals are unable to repay their loans and are forced to continue borrowing. consumer financial protection bureau (CFPB) reported 12 million Americans take out one payday loan each year and the loans often carry high interest rates. This demonstrates the value of earned wage access as a means of improving cash flow and potentially reducing the need to use costly forms of short-term debt.

This could be a game-changer because, According to the CFPB, pay period fees associated with payday loans are typically $15 per $100 borrowed, Equivalent to an annual percentage rate of 400% – with some as high as 600%. With the difficulty of paying back payday loans, employees are trapped in a vicious cycle of debt.

Earned pay access providers sometimes charge a fee for services, which is also often paid for by the employee. Consumer financial education is important for all consumers and those who use the Earned Wages Access tool should be aware that even small service fees can add up over time.

The benefits of earned pay access may go beyond workers. Financial institutions and billers can also reap the rewards of cash flow in the hands of employees before payday. For billers, this can reduce the number of late payments because some of their customers have to wait until the scheduled payment day to make payments. For financial institutions, employees may choose to redirect money that previously used to make ends meet by opening a savings account to pay late fees, overdraft fees or short-term forms of credit. Whereas Americans want To save more according to a recent study by Pew Researchthe harsh truth is about 3 in 10 (27%) American Not even a savings account.

There may be some in the marriage between innovation in payment rail and earned wage access Local communities and workers had the same positive impact as those railroad tracks in 1869. Instead of moving lumber from the forests of Oregon to factories in New York, money going into the hands of workers at the press of a button could keep millions of workers employed. The right track to financial wellness.

Elena whistler is SVP of Sales and Relationship Management at clearing house, is a US-based payment system operator that withdraws and settles more than $2 trillion daily through real-time payments via wire, ACH, check image and RTP® networks. Elena is responsible for overseeing the Customer Relations, Sales and Marketing teams to manage and expand its customer base

Veteran Bank Executive Rob Nardelli serves as Director of Commercial Banking for delipe, a leading financial technology company creating unprecedented payments innovation. In his role, Nardelli serves as sales Channel leads for top engagement.