Podcast March 3, 2021

DailyPay: Your money when you’ve earned it

powered by Sounder

These days, everything we could ever need is a click away. 

From groceries to furniture, every purchase is on-demand… 

Shouldn’t our paychecks be, too? 

After all, your money is yours when you’ve earned it — not when your employer pays it. 

That’s what motivates Matt Kopko in his role as Vice President of Public Policy at DailyPay, a Fintech company making monthly obsolete by giving employees access to wages they’ve already earned whenever they need them. 

What we talked about:

  • Why the monthly paycheck is antiquated
  • Why no one should have to take out payday loans
  • How DailyPay enables on-demand payments

The antiquated wage system

In an age of instantaneous, well…everything, our paychecks — doled out once or twice a month — seem terribly out of place.  

Why should you have to wait for weeks for the money to pay for something you can buy in seconds? 

This is especially confusing when you consider that you’ve already earned that money

It’s your property. 

Your money is yours when you’ve earned it, not when your employer pays it.” — Matt Kopko

The old system of monthly and semi-monthly payments doesn’t work anymore — and, truth be told, it’s not actually that old of a system. 

For most of the past half-millennium, you were actually paid at the end of a day’s work. But that changed when employers started being responsible for collecting taxes from their employees’ paychecks. 

So, really, DailyPay — enabling employees to access their wages on-demand as they are earned — is just helping return us to what was once the norm. 

And that has tangible benefits for so many people beyond the instant gratification of modern consumerism. 

It can dramatically improve lives. 

The end of predatory payday loans

One of the most obvious ways DailyPay and other on-demand wage providers are improving lives is by helping people escape the trap of the high-interest payday loans many see as predatory.

“We have the view that our users should never have to take out a payday loan ever again.” — Matt Kopko

These loans not only charge exorbitant interest, eating away at your paycheck, but they are often designed to encourage a “rollover” balance in fees. These lenders can often just push these fees into the next month, relying on the fact that borrowers won’t be able to pay them back. 

This leads to a horrible purgatory where borrowers are stuck in a system that, ultimately, diminishes the value of their labor in perpetuity. 

And it’s important to remember why people would seek these out in the first place.

Often, we’re talking about low-income workers who desperately need the money for important things like paying their rent or healthcare bill on time.

The worst part about this debt-trap is that these workers are borrowing money they already own. They just don’t have access to it yet. 

While there have been pushes to regulate the industry, many see them as not going far enough — but regulation isn’t necessary when Fintechs offering on-demand access to wages make payday loans obsolete. 

Competition is much more effective than regulation at stopping such practices. 

And while most on-demand wage providers are clearly superior to payday loans, Matt points to some features that he thinks make DailyPay the gold standard in the industry.

How DailyPay works

The primary differentiator for Matt between DailyPay and its competitors in the on-demand wage space is its robust feature set and benefits for both employer and employee.

For the employer

Once an organization adopts DailyPay, every payroll procedure can be kept — you can run payroll when you normally would, for instance. All they require is data integration — in order to verify time and attendance data — so they can know the hours employees have worked and exactly what they are entitled to. 

“We’ve built a technology stack that enables pay to be received in an on-demand capacity without having to be processed and the books closed in an on-demand capacity.” — Matt Kopko

From there, they can estimate (essentially to the penny) what that employee would be paid at any given day were they to run payroll. Then, those funds are made available to those employees. 

This has the obvious benefit of not forcing companies to overhaul — or even pause — their existing payroll system, which is often difficult considering, among other things, the challenges of maintaining compliance. 

More importantly, employers do not need to run payroll at the end of every day to ensure employees can access their money every day. 

For the employee 

On top of that, the way the funds are recovered from employees avoids some issues seen in their competitors, who have relied on unreliable methods like ACH transactions the night before payday.

That might not sound like much of an issue, but if — for whatever reason — those funds don’t appear when they are supposed to, then the employee is stuck with an overdraft fee. 

This can even end up in a situation not too dissimilar to the payday loan.

DailyPay’s research — showing $1 in every $50 either doesn’t arrive or is late on payday — has shaped their model to make sure they only ever recover funds when they are actually available.

And looking at those figures, it’s not too surprising that a competitor that didn’t factor this in is now subject to a $10 million class-action lawsuit over incurred overdraft fees. 

With DailyPay, employees can have peace of mind that they will not incur such fees and, unlike payday loans, these benefits cost less than many ATM transactions would.

Beyond access

The final benefit of DailyPay is the financial well-being component that real-time information on your wages provides. 

While their data show that most people only withdraw funds once a week or so, DailyPay has seen users checking on those funds at least once a day. 

And the added information of where you stand at any given time with your earnings allows you to make more informed financial decisions. 

It also breaks you free from the world where the fruits of your labor are divorced from the labor itself. When the two are tangibly connected, there are also psychological benefits that motivate you to continue your hard work. 

At this point, the industry is still young, but it already seems certain that wages-on-demand will become the new normal — it’s just a matter of time. 

Someday soon, “waiting for payday” will be as anachronistic as a VHS tape. 

And that’s good for everyone. 

To ensure that you never miss an episode of Payments Innovation, subscribe on Apple Podcasts, Spotify, or here and don’t forget to check out our YouTube!

Until next time!

———————————————————————————————————-

Find Your Bold

Currencycloud is here to back you as you leap boldly into the future. Get in touch with an expert today.

Get Started