On-Demand Pay Data: The $0 cost benefit that helps alleviate the need for predatory payday loans and reduces financial stress
On-Demand Pay Data: The $0 cost benefit that helps alleviate the need for predatory payday loans and reduces financial stress
In this webinar you will learn about…
- How COVID-19 accelerated the need for a daily pay benefit
- The new power of pay and why companies need to pay different
- When and how different income levels would use a daily pay benefit
A new co-branded survey from the Mercator Advisory Group and DailyPay, the leading fintech platform and premier provider of the daily pay benefit, reveals that by innovating the antiquated pay cycle model, workers can save money and become less stressed and more productive at work. All at no cost to the employer.
The study indicates that the timing of cash flow is extremely important to workers, and the option of flexible withdrawal of earned income before payday can prevent unnecessary financial strain.
With COVID-19 recovery on the horizon, the need for on-demand access to earned income couldn’t be more relevant.
Chief Innovation & Marketing Officer
Director of Debit and Alternative Products Advisory Service
Mercator Advisory Group
Prefer to read? Here is the transcript.
Good afternoon. I’m Karen Yetter, director of marketing, and on behalf of Mercator Advisory Group and DailyPay, I’d like to thank you all for attending our webinar, on-demand pay data, the $0 cost benefit that helps alleviate the need for predatory payday loans and reduces financial stress. Please note that today’s session is being recorded and all attendees are in listen only mode. There will be a question and answer session at the end of today’s webinar, so if you have any questions you’d like answered, please submit it online anytime during the webinar by clicking on the questions panel. I will now turn over today’s webinar to Sarah Grotta, the director of our debit advisory service. Sarah.
Thanks so much, Karen. I appreciate that introduction, and welcome to everyone for this webinar regarding on-demand earned wage access. I am Sarah Grotta. I’m a payments research analyst here at Mercator Advisory Group, and I cover a variety of products and markets in the payments industry, including this space. I’ll speak today on some of the market dynamics around earned wage access. We’ll also share some results of a survey that we conducted for DailyPay that has some really up to date information. I’m joined by Jeanniey Walden. She is chief innovative innovation and marketing officer at DailyPay, DailyPay being one of the market leaders for earned wage access solution. She’s also going to provide her perspective on the space and give you some insight into their platform.
We thought that we would start today by asking a question. We really want to understand our audience a little bit better, so if we could go to the next slide where we have our polling question. We want to ask you on a scale of one to five, how familiar are you with on-demand earned wage access benefits, where one is not very and five being really quite well versed on the topic? On-demand earned wage access is sometimes called daily paid benefit, if that helps you to understand the topic a little bit better. Please click on the response that best matches your knowledge. I’ll give you a few moments here, and then we’ll take a look at the responses. How are we doing, Karen? We’re getting some responses?
Yes. It looks like we have about 11% have one, not very familiar, 25% is two, 18% is three, 34% is four, and 17% is five.
Okay. Okay, good distribution there. Very good. It looks like we do have actually a fair number of folks are relatively well versed in the topic. We’ll make sure that when we talk about it, we sort of cover all levels of knowledge, but understand that we have a fairly knowledgeable group today. Thank you for that. Let’s move on to the next slide then, and I’ll give a little bit of an overview so that we’re all sort of starting from the same foundational understanding of on-demand earned wage access. While this product has been around really for a few years, there are a few people who may have just heard about it rather recently. As it seems rather explosive growth in the last couple of years and is actually now used by millions of US employees.
The description that I have on the slide is one taken from a recent report that we published at Mercator Advisory Group on the industry. It’s not specific to any market provider, but gives more of a universal overview. Again, earned wage access is an employer based solution. It’s offered similar to other work-based benefits, like paid vacation time. It’s important to know that earned wage access is not a pay advance product. A pay advance product is different in part because a worker outside of their relationship with their employer is reaching out to a third party for an advance on their anticipated pay. Employers interested in offering earned wage access will engage with a third party provider like DailyPay to really orchestrate the whole process.
When an earned wage access program is launched with employees, those employees are instructed to download a supporting app. After an employee has worked a shift or a day or some defined interval, they’re going to receive a mobile alert through that app or possibly an email if that’s the route they want to take telling them that earned wages are in fact available. They’re also going to find out how much money they can access at a particular time, even if their normal pay day isn’t for several days or maybe even weeks away. The employee finds out how much they have available to them, they respond through the app and request how much of the available amount they would like to access. What really struck me in researching this market is truly how little users are actually requesting on average.
I think there’s certainly going to be some employees who will ask for funds every day, every chance that they get and they’re going to be asking for the full amount. They kind of have that impression that they’ve worked, they’ve earned it, it’s theirs, so they should get access to it right away. There are many out there that are really a lot more strategic and they are using the app to really access funds for very specific purposes. When the employee requests funds, they’re often funded instantly, or they have an option to receive funds instantly. There are also options about where the funds are deposited. Some of the options available in the marketplace are that the funds could be sent to an existing account, they may be sent to a prepaid card, or even a bank account that is provided as a part of the solution.
DailyPay is an example of a provider that funds the requested earned wages requested by workers, and I think this is an important product feature. For businesses, the thought of funding payroll early can be a little bit daunting. Not all businesses are Apple or Google with massive piles of cash sitting around. For many, controlling their cashflow until payroll is due is really critical, so that’s, I think an interesting feature of some of the earned wage access solutions out there. It’s at the regular payday when the employer and the earned wage access solution provider are actually settling up those funds, and the employee is going to receive the remaining amount of their pay.
I think you did say something important in there that I just wanted to react to about employees asking for the full amount, because we actually don’t see that at DailyPay. In fact at DailyPay, 90% of people that are taking money out before payday don’t take anywhere close to the full amount out, and for those that will take the full amount that they may have earned on occasion, those amounts vary from week to week. We have actually never seen anybody make $100 and take $100 out. We’re seeing needs based activity, and in some cases, people need to take all of the money that they’ve earned to date, but the majority of the time, just like most people don’t get their paycheck and take all of their money out of the ATM every time they get paid, we actually have never seen anyone take all their money out.
Something important to note is I think certainly with DailyPay, but probably with most players in the space, there are checks and balances put into place, so there is never a situation where someone receives $0 on payday. In our case, we actually have an algorithm that ensures that all taxes and other types of deductions are withheld from money that’s even accessible to them, so we don’t run into a situation where someone can’t pay something as critical as child support or a tax lien or even base income taxes. I think it is important that one of the biggest concerns people had early on was if they gave it to their employees, they would take all their money out immediately, and that hasn’t proven to be the case with very, very exceptional elements where people run into a situation where they need all their funds.
I appreciate that background. I do think it’s really interesting that users actually have sort of that discipline not to take all the money all at once, and it is. They’re really thinking about how they’re using their money, which I think is really interesting. Let me talk a little bit about what we think is driving the growth of earned wage access. One is certainly the near ubiquitous ownership of smartphones by working age adults, and I guess that’s pretty obvious, but it really is critical to making this work well and to quickly communicate to workers with this benefit to help meet their needs. The communications are sent to employees through an app shortly after they’ve completed that shift, and it helps them to respond back quickly and get those funds to meet immediate and sometimes really dire needs. Okay, great. Looks like our slides are back. That’s great. One of the other benefits of having this functionality wrapped into a mobile app is there are certainly additional features that can be offered such as budgeting tools and help in managing savings goals. Another point that I think is driving the growth is the growth of freelancing and gig economy work.
Many gig workers are paid by the job, not by the calendar date, right? If I go and I take a job on TaskRabbit and I run some errands for someone, when that task is completed, I get paid. Salary workers and hourly workers who may themselves also be gig workers on the side are asking why they can’t be paid with greater frequency too. Then certainly when we think about it from the employer side, they view earned wage access as a means to differentiate themselves in the market as they look to acquire and retain their good employees. This is really important force in tight labor markets. I’ve even seen this benefit promoted on Help Wanted in announcements as an enticement to get workers for one employer versus another. Certainly, this employee perk may also increase employee retention rates. It gives an employee a reason to stick around, which certainly has the opportunity to save employers thousands, and for large employers, even millions of dollars annually in things like onboarding and training costs.
I love all those points. Sarah, we recently did some research during the pandemic and asked people what are they looking for in a job for those that were furloughed or lost their job. One in six said they were looking for a job that would pay them daily or give them a daily pay benefit, which we thought was very interesting that it’s become a need. We’ve also seen a shift through the pandemic from individuals needing money, like I need money to pay a bill, or I got in a car accident, or I’ve ran out of gas, to actually people using on-demand pay to take care of a household need where now I might not have a financial challenge personally, and I even might have money saved in the bank. I think the latest stat I saw was 53% of lower income households have someone in the household who’s either lost their jobs, been furloughed and can’t get unemployment’s just because everyone’s so busy they’ve been delayed, or they’ve had to take a significant pay cut. The daily pay benefit is coming more in handy to help out the household and not just the individual. It’s turning into a great essential tool for everybody, not just something that’s nice to have. Your points about the employer benefits are spot on. We love seeing those ads that talk about you get daily pay when you work at Kroger, or when you work at Tractor Supply. It’s great.
Yeah, and I think the fact that you’re even hearing employees requesting it, that just shows how common place I think that it’s starting to become. Let’s talk a little bit about the need and sort of some market sizing information. If we could turn to the next slide. I do think it’s kind of funny, why is it that employees are paid twice a month or every two weeks or even less frequently? If you think about it, it seems kind of arbitrary, but I think it has a lot to do with a precedent set in sort of the pre-computer days to give employers time to kind of collect and process pay data and taxes, and also about managing employer’s cashflow, but it doesn’t really have to do with getting workers paid when they have completed work or really when they have a need. We find that those individuals who can truly benefit from having access to pay when they need it is not solely a function of how much money they make, although it’s certainly an indicator.
What’s critical to understand is that population of individuals who are really on that precarious thin line between meeting their obligations and falling behind, where one unexpected bill or a drop in pay can really put them behind. Getting behind is where individuals find themselves paying overdraft fees, late fees, getting into other lending scenarios that can get them even further behind. That can end up creating longterm financial indebtedness and stress quite frankly. On this chart, we have a slide here from the 2019 data from the Bureau of Labor statistics. Here, we find that the number of workers who are in that sort of precarious or fragile situation where they’re struggling to pay their current bills or one unexpected expense could put them behind is somewhere around 28% of the workforce, or over 45 million individuals. Note that this data was pre-pandemic, right? This was 2019 data, so just think about how that’s changed with recent events.
Speaking of the pandemic, we have a slide here about some more of the data and how that’s really putting stress on employees today. This is some of the economic data on the decline of disposable income and also the number of unemployment filings. I heard just this morning that it was reported that an additional 2.1 million jobless claims were filed last week in the US, and I mean, it’s incredible. It’s truly incredible. I think that that total amount is somewhere around 24% of the US is currently unemployed. I have gotten the question, how does earned wage access apply to all of those laid off or furloughed employees? If you don’t have a job and aren’t earning anything, then the solution can’t help. I think Jeanniey, that kind of gets to some of the points you were making in that I do think that it can help.
First, there are millions of those who are still working, but have had to take a cut in pay or a cut in hours due to the pandemic, and that can create their current financial hardship. Also, many are a part of a household where there are multiple workers, including some who are still working and earned wage access can help those who are still working, but at a household level are experiencing a drop in pay overall. Let’s not forget too that some workers, when they do get back to work are going to likely struggle for a while to really get back on their feet. Mississippians have asked for mortgage deferments or a delay in credit card payments, and at some point this is going to kind of come back and haunt people, and having access to pay before payday might really help to manage through all of those temporarily suspended expenses when they come back home to [inaudible 00:20:22].
Yeah. We’ve actually seen that in a lot of the employee feedback that we receive at DailyPay. We’ve received a lot of comments and people are saying, “I’ve never had to use your service, but my husband lost his job and he’s going to get unemployment, but it’s been eight weeks and we haven’t gotten anything yet.” “Thank goodness I was able to use DailyPay when my daughter broke her arm.” These are in certain cases emergencies, where people are finding this as the way to band through. Interestingly just this morning, we were looking at some data that was showing an entire segment of our population that used to be frequent users who have actually slowed down their usage during the pandemic of our pay feature, which means accessing their pay early, but they’ve increased the usage of our save feature.
I think there’s a lot of research and data out there that talks about people aren’t spending as much in certain cases because there’s nothing to spend it on as far as restaurants and movies and concerts. Some people, where they are fortunate enough to be in a household where the income is still the same, they’re actually a little freaked out, and I know you’re going to talk about this data about unexpected medical costs, things like that, and so they’re taking this opportunity to start saving before they get their paycheck, which is fantastic. We love seeing that. I think it’s kind of both sides of the coin right now, but the very interesting data for us to see and continue to evaluate.
Yeah, very interesting. If we could move to the next slide, please. We do find that employees today are using sort of a wide variety of solutions to really help to pay obligations in between paydays when they don’t have earned wage access available to them. As this graph shows, a lot of times consumers are putting their bills on a credit card and paying them over time and incurring the interest expense. Actually, that’s the most frequently used approach, and certainly there’s a lot of that, that’s going on now as we start to see consumers really stretching their credit card balances. Workers also borrow from friends and family, which has all sorts of costs to it. What we also find here, another category is that consumers just simply don’t pay their bills.
Again, this is something that we’re seeing happening right now, just not paying rent and just hoping that they’ll be okay and they won’t get evicted, but of course not paying also leads to expensive fees and fines. Moving to the next slide, please. One of the things that we promise to do is to share some of the information and the key findings from the study that DailyPay and Mercator Advisory Group completed in January this year certainly prior to COVID-19, but still very recent and important data regarding the US market. What we did is we surveyed salaried US adults earning less than $75,000, and so that’s the population that we’re taking a look here. On the next slide, please. I just wanted to really share four points that came out of this particular study.
Interestingly enough, when we survey these individuals, they tell us that in a typical month, most of them feel pretty good about their ability to pay their bills. Even most of those who are making even less than $40,000, they’re comfortable that they can meet their obligations. It’s not surprising to see in these results that those who are making more money feel a little bit more confident about their ability to pay bills. Certainly, if we were to run this survey again today, we know that this slide’s going to look a little bit different, at least for the near term. We know employees are having trouble making payments now and many quite frankly are not particularly hopeful for the near term, and unemployment has really disproportionally impacted those that are in that category of making less than $40,000.
Next slide, please. While many of our responders say, I feel pretty comfortable about meeting my obligations, there are still many who are running out of money before payday. 18% are telling us that it happens really quite often and 30% say that they run out of money at least some of the time, and so if we think about that in the context of the total working population, that’s literally tens of millions of individuals. Next slide, please. We have a quote on here, and this might be one that you’ve heard of before. It’s actually reported fairly frequently, but the statistics is that 40% of adults in the US would not be able to come up with $400 if they encountered an unexpected expense. What we’ve seen recently is a lot of times, these are in fact medical expenses.
I guess knowing that, it makes sense from the data from our study shown here that those making $75,000 or less find that they end up borrowing money 70% of the time in the last 24 months in order to make ends meet. Again, that 70% of the survey takers had to borrow money in the last 24 months to make ends meet. It’s a pretty incredible statistic. Then the last point from the survey that I wanted to make here on the next slide is that employees are generally pretty frustrated with the available solutions to them today when they need to go out and borrow funds. The things that frustrate them the most have to do with the interest rates that they’re paying and other fees that they end up incurring, and that generally leads to further anxiety about their finances. Certainly, we gathered a lot of other data out of this study. I think we learned a lot about that population, but wanted to share those particular four points with you. I think now I’m going to pivot to hear from Jeanniey more about the DailyPay solution specifically.
Thanks so much, Sarah. The stats, I know we only have time for you to give an overview, but I mean these statistics and insights were fascinating. As you said, this study was done, the research was done before the pandemic, but one of the findings that really stood out to me and to our entire team was that the biggest risk or the biggest concern that people had about not having enough money to cover their bills was an unexpected medical expense. What we took away from that, because we thought about it a lot was you might have just enough to survive. You might figure out a way to make it through, but you’re laying awake at night and your financial stress is increasing because you’re thinking, “Oh my God, if I get sick, if someone in my family gets sick, if there is a car accident, how am I going to take care of it because it’s going to be such a big hit?”
Then here we are with a pandemic happening in March, and we actually almost saw foreshadowing in the research and all of this coming through. I would encourage anyone who’s listening to this webinar today, if you want to take a deeper dive into these insights either reach out to Sarah or reach out to us, and we’re happy to walk you through some of these findings as it may pertain to your organization or organizations that you’re working with because there were some very interesting elements help set us up for success as organizations as we continue to reopen. Talking about reopening, one of the things that we’ve seen out of the pandemic is that the workplace, as we know it, has completely been shattered. The new norm is completely different than any of us expected it to be, and having nothing to do with DailyPay. A friend of mine works for a vision insurance company.
When we all started to have to work from home, she said, “Oh my God, we don’t know what to do. We do everything in paper.” Everything that they had said as a digital transformation to take place over a three-year period had to happen within a three day period. Everything from the fact that simply people sending an insurance claims were still mailing them in, and someone needed to pick up the mail, take pictures with their iPhones, email those pictures as individual files to processors at home immediately. Everything that we all knew about work and life changed. We took that to heart at DailyPay, and wanted to look at how this was influencing every working American. Early in the pandemic, we started to see a lot of people, 400% increase in people taking out their money due to what we call a COVID issue. They weren’t taking it out because they all got sick.
Unfortunately, a number of people that use DailyPay did, but they were taking it out to stockpile. No one knew what was going to happen. We saw people taking more money out or taking money out when they never had before to buy medical supplies, hand sanitizers, wipes, diapers, chicken, toilet paper, anything you can imagine. People were buying gas to pick up college aged children from school, to transport elderly parents into their home to kind of look for safe shelter, and we really felt strongly about that. We made some changes to DailyPay throughout the pandemic to support every employer that we work with and help them make it through and every employee that uses the service as a lifeline, but also we created a video.
Hopefully, you all enjoyed that video because as I said, to us, if you go to the next slide, it really meant a lot to us to kind of put our thoughts in perspective and appreciate how the world was going to change. We’ve been having a lot of conversations with a number of our clients, which we call our partners here and our channel partners who we work with to make sure that the service can be available very easy and seamlessly at no cost to every company that has employees. What we really started to focus on were how employees were going to need to survive, how they were going to have to live and how they were going to make it through. You’ve heard me chime in as Sarah was sharing a lot of slides and talk about statistics and insights and research and feedback that we’re getting, and that’s very important to us because that is how we make product changes.
The first thing that we did when we saw the impact to people on their finances was we actually eliminated any fee to get funds out for next day. We wanted to remove any barriers for people that were still fortunate enough to be working or were part of that essential worker database that really needed to be out there and save the rest of us, and make sure that we had a healthy environment and could get food. We wanted to give them access to the money that they needed as soon as they needed it with no fees. Historically, DailyPay has a per usage fee, meaning if you’re going to withdraw funds from using DailyPay, you can put them on any pay card. I saw someone had a question about a pay card. We work with any pay card that’s out there, or any savings account, any bank account that’s out there. If you have a place to send your money, we believe that we should be as flexible as possible.
We have that capability there. We wanted people to have their money with no fee, so we took that hit on our side. It was my marketing budget and a few other things that we elected to reduce, and we chose to do that because it was our way of giving back. If you look at the next slide, we also have continued to look at research. What we started to see was that what was interesting before COVID where companies thought it was an interesting benefit, Sarah mentioned this very early on. You’ve got your traditional benefits like healthcare and dental, you’ve got voluntary benefits like pet insurance being super popular. DailyPay was being seen as one of those unique new benefits. It went from becoming a benefit for an individual to something essential for both a company and an individual. What we saw was that 90.1% of people said having access to daily pay during COVID reduce their financial stress.
As I said before, I came into two camps. Some people were saving money, other people were using money to survive and support the household. Either way is fine with us, and there is never a fee when you’re saving money using DailyPay. I know, Sarah you didn’t talk a lot about saving at the beginning of the earned wage access analysis, but we feel it’s pretty important that people can earmark dollars as they make them to put into a savings account to just start saving as much as we feel that it’s important for people to have access to their money. In certain cases, if you are in an hourly job, or in another role where you’re just starting, you’re out of college, you’re just starting to save, being able to earmark it so you don’t splurge on payday where you intend to take your paycheck and put half of it away to save, but then you see something great online and you have to have it, and the money never gets saved.
Our savings feature allows you to take advantage of that and start training yourself for healthy financial security. We also saw that 63.8% actually use DailyPay for COVID related expenses. Funny story here was we saw… I told you all about the 400% increase in usage in DailyPay for preparing for COVID. About a month into it, we started to see that people using DailyPay, we were seeing a significant spike in people using it for their phone bill. We had to scratch our heads for a minute. We’re thinking, everyone’s at home. Landlines are not really a thing, why does everybody keep saying their phone, their phone, their phone. Then we realized with everyone being at home and in many cases, two working parents and at least one child remote online schooling, people were running out of data plans. Oftentimes, the home internet was being used for one person, or there was no home internet.
People were streaming, or people were just going crazy and streaming enough Tiger King until they could watch the whole thing over and over again, but whatever the situation was, we did start to see that people were very grateful that they could extend their data plans and get access to that. Then we started to see a shift into the household expenses as I said, where it’s not necessarily, I need to pay my rent, but I’m covering the rent for my roommate until her unemployment kicks in. Now, we’re actually starting to see those expenses having people get prepared to go back to work, and we’re thrilled about that. If you go to the next slide, one of the areas that we’re focusing on at DailyPay right now is a fifth added product on our board platform, which we call Hire. Sarah mentioned it that some companies even put out when they’re hiring and recruiting people, “Hey, if you work here, you can get daily pay. You can get paid daily.”
In highly competitive environments like home health care, quick service restaurants today, grocery stores and supermarkets, it’s often a differentiator between, will I work at company A or company B? It’s also a differentiator for organizations as far as retention goes. A lot of people, when you start a new job have that odd three weeks before you get your first paycheck, or you get a paper paycheck that you have to wait until the next day to cash or find a bank that’s open. Now, you can get your pay as soon as you start your new job, and that often makes the difference between someone staying at a company or leaving earlier. We’ve actually started an initiative that we call Rehire America. It’s kind of phase two in our pay different category, and today we announced the launch of our Rehire America index.
You can go to our homepage and you can click a link to it, but effectively we’re following eight different industries and we’re looking at the trends on how quickly they’re bringing people back in an industry. We’re looking at how many hour the people that come back are working. Are they coming back part-time, is it a slow entrance, are they ramping up pretty significantly? We’re following hospitality, we’re following call centers, quick service restaurants. If you’re in one of those industries and you want to see how your company is fairing against the average, definitely check it out. If you’re not in one of those industries, but you’re looking for best practices or signs of hope, definitely check that out. We are doing it because we see, as I said, that one in six people are looking for jobs that offer daily pay, and organizations that are using daily pay are filling positions 52% faster because they can get people who really are eager and ready to work.
Now, those people stay longer. 87% of employees say that their opinion of an organization improved after being offered daily pay. In us speaking with a lot of HR executives, one of the sentiments that we know are challenging many people out there is the fact that companies did have to furlough a significant part of their staff. They are now bringing them back, but they’re not bringing everyone back. What is the guilt associated with a coworker coming to work and looking at the spot next to them where it used to be a very good friend or someone they considered family who didn’t get to come back to work? They weren’t fortunate enough to get a job. How do you rebuild that trust in an organization, how do you rebuild that comradery with your employees to make sure that they’re not worried every day, that there will be continued for lows or layoffs, especially as we move from season to season and everyone talks about potentially a second wave coming through. We also see, and we’ve seen this historically that companies see a 50% turnover reduction after implementing daily pay.
A company that has 50,000 employees can see about $10 million a month in cost savings by reduced fees for additional hiring, onboarding, and turnover. These are pretty significant impacts that that people are starting to see. I think that they’re all worth bringing up because as you look at the earned wage access on demand pay space, and it’s great that so many of you are familiar with it. There’s so many benefits that go beyond just giving your employee an additional voluntary benefit. This impacts the bottom line of the organization. It’s no cost to an organization, it’s no risk to an organization. DailyPay provides all of the money for any early access, so there’s not a change on a balance sheet or to any funding that’s done in payroll. The payroll process stays exactly the same. It’s all upside for everyone involved, which I think is great. With that said, I think our last slide, Sarah, I’ll probably turn over back to you to talk about the differences that you’re seeing in earned income access platforms and some of the recommendations that you give to people who are evaluating solutions out there.
Yeah. Certainly, you have to look for the solutions that’s going to work best for your particular employee base. We’re here talking with DailyPay, and DailyPay’s certainly provided all of the research, but they are a leader in this space with others however. I think some of the things that we’ve listed here are attributes that you may want to consider certainly how is funding handled? Is it company funded, where you as the employer may be on the hook for making sure that funds are available regardless of how much your employees may be requesting on any given day, or is it funded by the provider or a deductions model? What is the access availability, and how much of that earned wage can be extended to the employee? That has everything to do with how integrated the service is into your payroll solution to provide that level of visibility into the earned wages that will allow the maximum amounts access to the employees.
Certainly, compliance is clearly important. We’re not compliance experts, but you’ll need to become comfortable within your own organizations policies that the providers that you’re looking at are compliant in the states in which you operate. I think those are some of the key points that we’ve looked at in some of our research. Next slide, please. I think we’re coming up to maybe the other polling question. Yeah, so sort of to kind of close things out before we jump into some of the questions, we just wanted to make sure that you got some information out of today’s webinar. Please respond if you’ve learned something new about the on-demand earned wage industry during this webinar, with one being not much and five being a good fit. That would help us out a lot. Maybe we can turn over to Karen for some of the questions, but before we do that actually, Jeanniey, I thought of a question, if you don’t mind taking one from me.
One of the things that I was thinking about in researching this industry is certainly the focus has been on sort of the low end of the economic spectrum, low earners. I think it’s interesting to note, however, that there are those who are really comfortably in sort of that middle class arena that could benefit from these services as well. Do you any insight? Do you think that in the future we might be in the scenario where we’ll start to see these types of services offered to individuals who are making six figures annually?
Yeah, absolutely. In fact, 10% of people that use daily pay right now are in a six figure salary. It’s certainly not just for the hourly employee by any means. I will tell you a couple of funny anecdotes from people that are on the higher end of the earning skill or earning scale. One of them emailed us and told us that they actually use their daily pay so that they can take money out to day trade on certain investments. Now, that is something I would never try in my life because that would be a ridiculous loss of money, but in this case, it’s something that this person was quite good at and they’re saying that they’re able to make more money by taking their pay earlier and put it into day trade initiatives and watch the stock market than they would be if they took their money out and put it into a savings account. There’s all different reasons that people use DailyPay. It’s not just to make ends meet. We’ve had people, one of my favorites is a story of a man who was training to be an MMA fighter, makes over six figures.
He literally used DailyPay to see how much he was earning. He was in a commission job, and so when he was earning more commission for sales, he was able to take his money out earlier to accelerate some MMA training. He was able to become MMA certified and live through a dream that he’s had since he was younger. We’ve seen people taking out money to pay down bills, to improve credit scores, to buy houses and cars. I heard from someone from a big four company last October that told me that his company offers it and he had a tree fall in his very large yard in Georgia, and when they took the one tree away, it caused 18 other trees to have to be removed and long story short, he had to redo his entire backyard, which used his quarterly bonus which was fine. Then his daughter went to the playground the next day and broke her arm and needed to get surgery on it, so wasn’t it great that he could use DailyPay to just take care of all that stuff immediately? It’s pretty interesting, and I do see it being used for every working American, whether you’re saving money or whether you’re taking it out to make advantageous moves.
For those people that answered a one or two that you haven’t learned anything, I know that we’ve got some questions, but I would love to know what you were hoping to learn on this call that Sarah and I didn’t talk about because I’m sure between all of the great insight and research that Sarah has from a Mercator standpoint or the examples in history that we have, we could probably tell you something that you’re looking to learn about that we didn’t cover today. We just didn’t know what it was.
Yeah. Well, maybe we can get to some of those questions now. Karen, are you going to load some questions our way?
Absolutely. One of the first questions we got was, you may have already covered it, but was the prepaid card you mentioned, is that something provided by DailyPay?
At this time, DailyPay does not offer a prepaid card, but we work with everybody who does, whether it’s the ADP Wisely Card or Visa card. We want to be flexible so that we can support every employer.
Okay, great. The next question is around the size of companies that you work with, is there any limitation to the number of employees that the company has to have?
Sure. There’s not really a limitation on size that an employee has to have. They do need to pass a credit check though. We work with companies, from smaller amounts of employees somewhere in 100 to 200 range all the way up to 300,000 plus range. As long as we can get through credit checks, then I think we’re good.
Okay. How do the economics of providing daily pay offering workout for employers?
It’s a huge benefit for employers. As I mentioned earlier, DailyPay costs zero for an employer. There’s no cost to integrate DailyPay into your payroll and time management systems, unless your payroll and time management company charges you an integration fee, but there’s no cost from DailyPay. There’s no change to your payroll process, so you don’t need to hire additional payroll staff or people in the back office to implement a daily pay. We actually provide tier one and two customer support. We have both online and call center support, so there’s no need for you to increase your call center staff by any means for answering those questions or your HR team. We also do the early access funding. As Sarah said, if your employees took out $1 million collectively before payday, that money comes from a daily pay fund that we have set up and on payday, when you’re giving everybody the amount that they didn’t take out, for the people that took money out early, those funds just get sent back to DailyPay. That also means that we take on the risk.
If you have an employee who forgot to clock out for example, and they got four extra hours in their paycheck and a manager didn’t check it. They get their daily pay, they decide to leave the company, your company cuts them a final check. You pay them those four hours. Somewhere between then and payday, you realize we kind of overpaid them four hours. Since it’s already been given to them through DailyPay, we actually assume that risk, so you’re at no risk. We don’t debit employee’s bank accounts, we don’t go after any kind of funds for repayment. We do have some sort of bad debt percentage written into our risk scoring models, so that gets assumed for there. It’s no cost, but at the same time with a 50% reduction in turnover, I was actually speaking about a client that we have that is in the home healthcare space with 50,000 employees. They’re not all using DailyPay, 40% of them are. They save, and I’m not kidding $10 million a month, pre-COVID. They were saving $10 million a month on recruitment and onboarding because of the reduction in turnover, and we see that across the board. I can’t promise you $10 million a month to the bottom line, but I can tell you that it’ll be a positive experience.
Okay. In addition to channel partners, do you work with employee benefit brokers slash consultants?
1000%, just send me an email and we would love to work with you.
Okay. The next person says she’s curious about how the employee reconciles the pay stub to their pay advances.
There’s no change on the pay stub. Basically, the way that it works is you open up your DailyPay app and it will say something like, and I’m making up the money for easy math, you have $300 available in DailyPay. Your next payday is in three days from now. If you take out $100 on before payday, then when you open up the DailyPay app, it says you now have $200 left and payday is now two days away. On payday, every day you can look and see how much money you’ve earned less how much money you’ve taken out, and you can actually see how much money will be in your check on payday. As I mentioned before, we have an algorithm, some AI built that ensures that you can never take out more money than you earn and you also can’t take out more money than you need to cover your taxes and other deductions. If you earned $100 and $20 needs to be set aside for taxes, what you’ll see in DailyPay is you’ve earned $100, $80 is available to be taken out, so you know on payday that $20 will be held as withholding. Then it all gets managed out there. Your paycheck, when it comes, your paycheck says you worked 40 hours, you earned $600, you got paid $600. Some employers identify that you got paid $600, you took some out early, here are the dates. Most people don’t. It’s just a standard paycheck.
Great. Do you see differences in how employees of SMBs use the offering than larger employers?
That’s a great question, and I can’t tell you that I see a difference in size of company. I can tell you I see a difference in type of company. For example, with a lot of companies that are hotel affiliates, where you might own three Marriott hotels, we actually see general managers being the biggest fan and champion of a DailyPay service because it’s a way that they can incent their people to make sure that they come into work, so they don’t have to do the valet parking or the cleaning of the rooms, or even be the chef for the day. For certain types of companies, we see the champion being the general manager or the regional manager to manage the pay staff. In restaurants, we often see that the champion could be the restaurant manager or the restaurant owner. In other large corporations, the champion very well could be the corporate HR person because this is in line with a digital transformation goal or agenda. As far as usage goes or promotion goes, we really invest a lot. We have a team called total excellence, and we invest a lot in partnering with you to find out why you want a DailyPay solution, what it’s going to mean to your employees, and we actually custom build a rollout program for you to make sure that it’s as successful as your needs are for your individual organization.
Okay. I think we have time for one more question. We aren’t going to be able to get to everyone’s questions, but we will follow up, I’m sure with answers to these questions. The last question that we’re going to ask you is what is the employer’s implementation list and how long does it typically take?
If you have a question that I haven’t answered, you can find me on Twitter. As far as the employer’s implementation lift, it’s very small. You need to send us a few files. Depending on who you work with for your payroll and time management system, it can be as short as three hours, it can take up to 40 hours of work at the most, but it’s a very minimal on your side. It truly is a number of files. We’ve invested a lot of time and money in integrating with the channel partners that you saw and others, and the implementation timing is really based on you. During the pandemic, we’ve had people that called and said, “Hey, get us up as quickly as you can.” A lot of people accelerated their implementation, so it’s really up to your timeframe.
Great. Thank you, Sarah. Thank you, Jeanniey. Thank you everyone for participating in today’s webinar. Again, if you have any questions or you don’t want additional information, please email Jeanniey. Thank you very much. This now ends our webinar.
DailyPay, the premier provider of the daily pay benefit, goes beyond financial wellness with a flexible, simple, and compliant pay experience that strengthens the employee-employer bond and significantly enhances the employee experience throughout the enterprise, at no cost to the employer.CONTACT US