Subscription-Based vs. Fee-based On-Demand Pay

Predictable income for providers may result in overuse by users

According to a recent CNBC article, subscription charges, for everything from exercise equipment to streaming services, cosmetics, and clothing rentals, are on the rise, particularly among the Millennial and Gen Z demographic. And while “a $4 or $8 subscription for streaming or makeup might not sound high — it adds up and might result in ‘accumulating consumer debt,’” according to Chantel Bonneau, a financial advisor for Northwestern Mutual.

According to the article, all this money being allocated to subscription services is draining people’s wallets and wreaking havoc with their financial freedom. “Recurring revenue is nectar for investors given it provides predictability,” Plaid CEO Zach Perret said.

But this predictability for the company selling the product or supplying the service is rarely in the best interest of the consumer, and may, in fact, result in increased debt and an inability to save.

The same is true for the various on-demand pay models. Many providers operate under the same type of subscription model, charging users a per-pay-period or monthly subscription rate, whether or not they ever actually use the service to request a transfer.

DailyPay, on the other hand, operates on a per-transfer, fee-based model. An employee is only charged an ATM-like fee when she elects to actually transfer a portion of her earnings from her Pay Balance to her bank account. 

Why does DailyPay operate in this way?

Because we believe that subscriptions encourage greater usage in an effort to “justify” having to pay the subscription fee. That’s simply because many users are of the mindset that if they don’t use it, they are just wasting their money on a subscription fee. 

In terms of a subscription-based on-demand pay benefit, we think this might even encourage employees to withdraw funds when they don’t actually need them, leading to irresponsible usage of the daily pay benefit. By offering a simple and transparent utilization-based fee structure, DailyPay encourages responsible, need-based usage of the daily pay benefit.

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