Friday, July 8, 2016

Alleviating the Need for a Payday Loan?

This week the New York Times had an article about new payday options for workers that are catching on. After helping people fight off predatory payday loan companies for the past five years, it's interesting to see these new options.

The article points out that the options include payroll cards, ATM's and other ways for people to get their income as soon as they have earned it. One of the downsides, like most things in life, is the fees that are associated with using these types of services. But when compared to bank overdrafts, the predatory payday loan companies and other ways to get money quickly.

However, the article points out that from the employer's perspective, instant payment may motivate the employees to work longer hours. Also, for an employer, giving raises is expensive but giving employees access to their earnings doesn't need to carry the same expense.

The article also quoted Ryan Falvey, the managing director of the Financial Solutions Lab at the Center for Financial Services Innovation:
As the economy has gotten faster and people's lives have become more tenuous, the speed at which people get paid starts to matter lot more. I don't think this is a flash-in-the-pan thing. A year or two in, these are products that have significant user engagement, and they're growing very quickly.
It will be interesting to see if these types of options start becoming more mainstream and available to more workers.