The Importance of Thorough Credit Checks for On-Demand Pay Providers

Illustration of a large clipboard labeled "Credit Check" with a gauge, a person with a magnifying glass, another person sitting on a calculator amidst gears and a briefcase, highlighting the role of on demand pay providers.

A few recent bankruptcies have taken a large toll on the on-demand pay industry. Lord & Taylor department store, NPC International, which is the largest franchisee of Pizza Hut in the United States, CEC Entertainment, which is the parent company for Chuck E. Cheese, and CraftWorks Holdings, the parent companies of Logan’s Roadhouse and Old Chicago Pizza & Taproom all filed for Chapter 11 Bankruptcy over the past few months. Their on-demand pay vendor is now owed close to a million dollars from unrepaid loans for employee transfers. 

Situations like this can affect the on-demand pay provider’s ability to provide adequate service to its existing partners or its ability to afford to take on any new partners in the future, which is important to consider when selecting an on-demand pay provider.

Why a strong credit check process is essential

There’s certainly a lot of information out there on how to select the best on-demand pay provider for your company. However, one element of the selection process that is often overlooked is ensuring that the provider has a strong credit check process in place for new employer partners. Choosing an on-demand pay provider who doesn’t vet employers that they plan to partner with can be extremely risky. It’s risky because the provider is assuming new financial risk associated with less financially stable partners, and in cases where those companies go bankrupt or are unable to repay their debts, your service from the provider may be negatively affected through their loss of funds.

An on-demand pay vendor needs to have thorough credit risk underwriting and management processes in place to make sure the platform can service all of the employees from all customers at all times seamlessly, including the new users that are brought on as the company grows. Without these rigorous processes in place, one customer’s financial difficulties could lead to service disruption for all users, including for employees of other customers. The recent bankruptcies mentioned above have highlighted how vendors’ safety and soundness can be put at risk without a proper credit and risk underwriting process.

Protecting our partners and their employees

To avoid this risk, DailyPay has a thorough credit check process as a part of our partner onboarding journey. Every potential DailyPay partner goes through:

  • A risk committee
  • A credit committee
  • A credit risk evaluation 
  • Ongoing monitoring of the partner’s financial health once they are officially onboarded

Not only does this process protect DailyPay from risk, it also protects our users and their paychecks. Our financial stability as a company is paramount to providing the highest quality of service possible to employees who depend on our technology for financial wellness.

Want to learn more about DailyPay’s thorough on-boarding process? Click here to book your free consultation today.

Get a Free Demo

Make Your Business a Place Where People Love to Work

Speak with a Specialist