More people are getting paid by the day as apps and employers come up with a new routine

Like a growing number of hourly workers, Jenna Gallegos no longer has to wait two weeks for her salary. Instead, it can be paid daily.

She uses a service called DailyPay to get money for the hours she has already worked before payday. “It’s very convenient, especially if you have an emergency and need cash right away,” she said.

Gallegos uses DailyPay a few times a week, but she added that she sometimes takes out too much money and ends up in a hole later. And she doesn’t like that she has to pay a small fee. Still, she’s glad it’s an option.

DailyPay is one of many payday advance apps that have popped up in recent years that give workers quick access to their paychecks. Some like Earnin are available to everyone. Others, including DailyPay and others such as Branch, Even and Payactiv, are offered to workers through their employers.

At a time when many businesses are struggling to find workers amid the pandemic-induced labor shortage, some employers are considering offering these services as an added benefit to help recruit and retain workers. workers.

Proponents of these services note that they offer workers who live paycheck to paycheck much better alternatives to payday loans, cash advances, late fees and overdraft fees.

Consumer advocates warn that the services should be used with caution, especially since some of them charge small fees for initial transfers.

The Twin Cities region, which has been a financial services hub for decades, has seen some of these companies set up shop here.

In 2019, New York-based DailyPay opened a second office in downtown Minneapolis, which quickly grew to 150 employees and now houses its customer support center and payment processing. After raising an additional $175 million in a Series D funding round in May when it was valued at over $1 billion, DailyPay now plans to add another 50 workers in the Twin Cities of end of the year.

Meanwhile, Branch, a Minneapolis-based fintech company that shifted from helping employees swap shifts to speeding worker payments, plans to double its workforce to 200 by next year. Branch also recently secured $48 million from private investors and a $500 million line of credit in a Series B funding round.

Jason Lee, CEO of DailyPay, says these services are growing in popularity as people have grown accustomed to being able to move money whenever they want, like paying a friend a few dollars via Venmo when they go out for a slice of pizza. .

“All of us as consumers have become accustomed to money moving instantly and money being controlled in the palm of our hand,” he said. “What we want to do is create a world where, minute by minute, hour by hour, day by day, you can control every aspect of your payroll the same way you can control every aspect of your account. running.”

Last year, DailyPay hired one of its largest employers for the service: Minneapolis-based Target, which employs nearly 400,000 workers across the United States. He also works with other big companies such as Dollar Tree and Big Lots.

DailyPay charges workers $2.99 ​​for an instant transfer. For a next day transfer, it’s $1.99 or free depending on the contract. Company executives note that it’s cheaper than some off-network ATMs.

“That may not seem like much,” said Ted Rossman, senior industry analyst for CreditCards.com, but the fees can add up and cost you money you could be saving. “It can be a slippery slope.”

Although not technically a loan, Rossman said a $3 fee to withdraw $100 over two weeks equals an annual percentage rate of 78%.

But he said he understands why some workers might want to use these services in a pinch. “There aren’t a lot of good alternatives, which is why I think we’re seeing these kinds of things popping up,” he said.

Branch, which works with companies like Kelly Services, doesn’t necessarily charge a fee to access payroll upfront, but it does for instant transfers to an external debit card.

The goal, said branch CEO Atif Siddiqi, is that consumers don’t have to use payday advances regularly and that they build up a cash cushion.

In financial services, these businesses are known as the earned wage access industry – and they are largely unregulated.

Some consumer advocates want the US Consumer Financial Protection Bureau to reverse its decision last year not to consider these services as providers of credit, exempting them from certain consumer protection laws.

Meanwhile, employers claim that these payday advance apps have become very popular with their workers.

Since it began offering DailyPay last spring, about 100 of Mary T’s 900 employees use it in any given week, said Jason Tjosvold, chief administrative officer of the home and healthcare provider. based in Coon Rapids.

Mary T previously offered loans to employees who needed emergency funds, but some workers found the process cumbersome and didn’t like the time it took.

“It’s hard for people to reconcile how they can take a ride or order a meal and get it within half an hour,” Tjosvold said. “But if you work on the first Sunday of our pay period, you don’t get paid until 20 days later, so [that is] basically three weeks.”

Mary T is in an industry that is still struggling to fill positions, a challenge made worse by the pandemic. So adding DailyPay as an option was also an additional recruiting tool in addition to other things he did such as referral bonuses, increasing his 401(k) match and granting more vacation time.

Mall of America, which pays its roughly 600 employees twice a month like most employers, began offering DailyPay in 2019.

“Employees want choices and the ability to access their pay whenever they want,” said Carrie Wright, the mall’s vice president of human resources.

About half of the mall’s staff have signed up for DailyPay, meaning they have logged in and created an account. And about a quarter of them are considered engaged users, making an average of 2.5 transfers per week, with the typical amount being $100, according to the mall.

Still, not everyone is rushing to use these apps. Zetta Sharkey, a guard at the mall, is not interested in receiving part of her salary early.

“I’m old school,” she said, adding that she preferred to be paid bi-weekly.

That way, she won’t be tempted to spend it right away, which she added could happen often since she works in a mall.

Comments are closed.