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I do not know if this is financially responsible. How exactly will this prevent a horrific snowballing effect?
> We thought employees would use our app because it’s innovative, but they mostly use it because they really need the money. This came as a surprise to us. I'm having real difficulty working out how this could possibly have come as a surprise, of course people are using your pay advance app because they really need the money. Why else would someone take an advance on their pay?
Good point. It would have been more accurate to state that we were surprised at how much people used the app! Over 40% of employees that have access to our app use it! Also, we were surprised by how high user retention is.
There are instant approval credit cards and low credit limit cards.
And credit cards even allow cash advances at 20-30% annually.
So, for the example with the gas station customer, using a credit card and carrying the balance for a few weeks would cost them $0 in fees if paid back in the same timeframe as this pay advance. Or they could take a cash advance from an atm and pay 30%/365*num days until repaid.
Isn’t this problem more easily solved by more access to credit cards? It seems like the examples where an advance is needed would be more easily, and even cheaply, solved by using a credit card and repaying on payday. There are instant approval credit cards and low credit limit cards. And credit cards even allow cash advances at 20-30% annually. So, for the example with the gas station customer, using a credit card a…
I mean, if workers are withdrawing money this month, which I presume is then taken off their wages next month, they are now in the hole, and even without interest, the problem just gets worse and worse, because then the next month they are more likely to withdraw early because they have less money. I do not know if this is financially responsible. How exactly will this prevent a horrific snowballing effect?
Isn’t this problem more easily solved by more access to credit cards? It seems like the examples where an advance is needed would be more easily, and even cheaply, solved by using a credit card and repaying on payday. There are instant approval credit cards and low credit limit cards. And credit cards even allow cash advances at 20-30% annually. So, for the example with the gas station customer, using a credit card a…
The difference, I think, is that the credit card model is an unsecured loan while Payflow seems more like receivables financing. Big difference in the perceived risk exposure.
It’s great that you’re finding a way to pay people quicker that’s less bad than payday loans! What stops employers from paying wages more often right now? When I worked in the US, some places would pay you every two weeks. With instant bank transfers, couldn’t that frequency go down to weekly or daily, without the need for a middleman?
A lot of it would depend upon how payroll is handled. There are plenty of employers where the hours worked are written on paper, then transcribed to a common document format and sent to payroll, then transcribed into the payroll software. Since so much of the process is manual, it is likely to be batched and performed weekly. Even when it is done daily, the daily is unlikely to include weekends (which is shifted to e…
It's a great problem to solve, and killing the payday loan industry is a good thing to do. Out of curiosity, why is the app UI and feature set practically identical to Wagestream (I worked there last year, so i'm pretty familiar with it)?
>Workers living from pay check to pay check have traditionally been vulnerable to exploitation
And the proposed solution doesn't fix that. Most of those people don't have a problem with unexpected expense once a year. They don't budget and are short on cash every month. So now imagine Bob needs money halfway through the month. He takes out 50% of his pay. He uses is for immediate needs and than has to live at 50% of his pay for the next 1.5 month.
How is his situation any better?
Also I can 100% guarantee you, most people working in this space are working on loans for those users. They don't plan to stay as just company benefit. But even if you will 100% never do that I just don't the see advertised benefit for the workers.
This is just something that sound nice when you don't think too much about it. That explains why the companies are eager to implement this benefit at their companies. At the end the workers will struggle just as much and the struggle will stay hidden from the eyes of the employers, because of the financial problems stigma.