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Forbes
17 hours ago
- Business
- Forbes
How Earned Wage Access Is Reshaping The Employer-Employee Relationship
Close-up Of A Businessperson's Hand Giving Cheque To Colleague At Workplace One of the many ways that business leaders are adapting to inflation and economic uncertainty is by helping employees with innovative payroll tools. Earned wage access programs— powered by fintech startups like Earnin, DailyPay, and One@Work (formerly Even)— are changing how workers get paid. With EWA tools, employees have the option to access their salary before their scheduled payday. These digital solutions embedded directly into payroll and HR platforms offer millions of hourly employees immediate access to wages they have already earned but not yet received. This shift is fundamentally altering the employer-employee financial relationship and reshaping workforce management. The trend is so popular that both Indiana and Maryland passed local EWA regulations in May, joining roughly a dozen states that already had their own EWA-specific regulations. For businesses, EWA is more than a perk. It is a strategic fintech-enabled benefit that drives talent attraction and retention, especially among younger workers who expect real-time control over their pay. As venture capital fuels innovation in on-demand pay and embedded finance, companies must keep pace with these technology-driven trends or risk falling behind. Yet, as EWA grows, questions arise about whether these programs create new debt risks and how regulators nationwide respond. Why EWA Is Taking Off According to a Consumer Financial Protection Bureau report, more than 7 million workers used EWA services in 2022, moving more than $22 billion in transactions. The Federal Reserve Bank of Kansas City found that nearly 80% of consumers aged 18 to 44 expect employers to offer such pay flexibility. The appeal is clear: EWA provides liquidity to workers caught between paychecks without pushing them toward costly payday loans that trap borrowers in debt cycles. For employers, these fintech-enabled solutions provide more than convenience. Integrated via APIs with payroll and financial wellness platforms, EWA reduces employee stress and turnover. Faster wage access helps workers cover expenses promptly and fosters a more stable and productive workforce, delivering measurable return on investment for businesses. States Split On How To Regulate EWA Rapid fintech innovation in EWA has outpaced regulators, producing a patchwork of state laws with differing views on whether these programs are loans. States like Arizona and Montana have issued official opinions stating that fully non-recourse, no-interest EWA products are not loans. These products simply accelerate payment of wages already earned, with providers taking on the risk if repayment fails and without engaging in debt collection or credit reporting. But the picture changes when providers charge fees. If an EWA product includes fees, especially those resembling finance charges or interest, it risks being reclassified as a loan under state laws. In that scenario, providers almost certainly must obtain licenses and comply with lending regulations, including interest rate caps and consumer protection mandates. Connecticut's SB 1396, effective October 1, 2025, reflects this approach by classifying fee-based EWA as small loans subject to licensing, fee caps and disclosure requirements. California's 2024 regulations similarly treat these transactions as loans subject to disclosure and consumer protections and mandates annual reporting and examinations. Other states including Nevada, Missouri, Kansas, Wisconsin, South Carolina, Arkansas and Utah have enacted comparable laws mandating licensing, surety bonds, no-cost wage access options, transparent fee and tipping disclosures, bans on interest or late fees and prohibitions on credit score use or debt collection. Wage Laws And The Early Pay Puzzle EWA programs must comply with state wage and hour laws that govern when and how employees must be paid. These laws protect workers by restricting unauthorized wage deductions and requiring timely, full payment of wages. In employer-funded programs, where employers advance wages early, wage laws like California's require signed employee consent for wage assignments and limit deductions to 50% of wages. Employers must ensure wage advances and deductions comply with these rules to avoid penalties. Third-party funded programs advance funds independently and recover costs through employee-paid fees or tips. These arrangements generally do not trigger wage deduction laws but may face other regulatory scrutiny (e.g., consumer credit regulations like the Truth in Lending Act, state payday lending laws and money transmitter licensing requirements). Fees charged by some EWA providers can also raise legal concerns. When fees are deducted directly from employee pay or charged for wage access, regulators may view them as unlawful wage deductions or obstacles to timely payment, increasing scrutiny and risk. U.S. Regulatory Challenges On The Horizon Several court cases across the nation are illustrating the risks and regulatory challenges facing EWA providers. This year, the New York Attorney General Letitia James filed a lawsuit against MoneyLion and DailyPay, accusing them of disguising predatory payday lending as EWA. The suit alleges excessive fees resulting in high annual percentage rates, deceptive tipping practices and misleading consumers about the voluntary nature of fees. This high-profile case signals increasing enforcement risk, particularly in states with stringent lending laws. At the federal level, the regulatory environment for EWA companies remains unsettled. While the CFPB's 2020 advisory opinion recognized EWA as a non-credit product, a 2024 proposed interpretive rule and a 2025 advisory opinion controversially classified it as credit, creating widespread uncertainty. The CFPB's recent decision to rescind the 2025 advisory opinion is seen as a positive step, yet federal oversight continues to evolve. The Regulatory Stakes Of Securitizing Earned Wages DailyPay's recent move to securitize earned wage receivables marks a key milestone in the fintech-driven earned wage access market. Securitization means the company pools earned wage receivables and converts them into asset-backed securities sold to investors. This process provides DailyPay with immediate capital to fund more advances and scale its operations. This innovative financing approach reflects growing investor confidence in earned wages as a reliable asset class, enabling scalable growth for on-demand pay solutions. However, as securitization of earned wages remains a relatively new practice, it raises important questions about consumer protection, transparency, and regulatory oversight. Regulators will need to carefully ensure that employee rights are protected, disclosures remain clear, and the management of these receivables meets rigorous standards. At the same time, fintech providers like DailyPay must implement robust risk management to address operational, legal, and reputational risks inherent in such complex capital structures. The evolving balance between innovation and regulation will be critical in shaping the future acceptance and sustainable growth of earned wage access financing models. How Companies Can Manage EWA Risks Employers must look beyond regulatory compliance to consider the long-term financial health of their workforce. While EWA provides short-term relief from cash flow challenges, fees and tipping practices risk creating debt-like cycles if not carefully managed. Consumer advocates and regulators remain concerned about predatory practices such as default tipping or hidden fees that could undermine EWA's promise as a financial lifeline. Best practices include providing clear and upfront disclosures about fees, voluntary tips and repayment terms. Employers should offer no-cost wage access options and monitor employee outcomes to identify potential overuse or financial stress. Integrating EWA within broader financial wellness initiatives promotes greater long-term stability. These strategies reduce regulatory and reputational risk while strengthening the employer-employee compact. EWA is more than a fintech innovation. It reshapes how workers access and manage their earned income. When designed responsibly, EWA alleviates financial anxiety for millions of workers and fosters healthier workplace relationships. However, if providers and employers fail to navigate the complex regulatory landscape and manage risks effectively, EWA risks becoming another costly form of credit disguised as convenience.
Yahoo
a day ago
- Business
- Yahoo
DailyPay lands novel funding
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. Earned wage access provider DailyPay closed on a $200 million asset-backed securitization deal with investment banks Barclays, Citi and Morgan Stanley, the earned wage access provider said in a press release last week. The transaction closed on June 25, according to a spokesperson for the company. Barclays was the lead bookrunner and structuring agent for the transaction, while Citi and Morgan Stanley were joint bookrunners. The transaction will enable DailyPay to work with more employers that use its on-demand wage services, according to the June 30 press release The $200 million securitization means DailyPay now has nearly $1 billion in debt financing backed by its EWA receivables, including a prior $760 million in secured debt with Barclays, Citi and and the financial firm TPG Angelo Gordon, the release said. New York-based EWA DailyPay contends that it is the first company in the earned wage access world to land such an ABS financing deal. All four classes of the new debt notes will trade publicly, the spokesperson said by email. 'This securitization marks a first for our industry, with strong investor demand validating our differentiated approach,' Deepa Subramanian, chief financial officer of DailyPay, said in a statement. 'With $25 billion in payments volume, we are continuously looking for new ways to optimize our capital structure to support our growth ambitions.' The securitization deal will let DailyPay expand its clientele by catering to more employers that want to offer EWA services to workers, CEO Stacy Greiner noted in the release. The company's clients include major employers such as Kroger, Six Flags and Dollar Tree, per the company's website. DailyPay has been locked in a battle with a key regulator in New York. In April, the company filed a lawsuit against the New York attorney general's office, seeking to prevent the enforcement agency from blocking its earned wage access services. Later that month, the New York attorney general's office sued DailyPay and MoneyLion Technologies for allegedly charging 'illegal, high-interest loans' to workers. As DailyPay and the New York attorney general face off in court, more states have been adopting EWA laws and implementing regulation to oversee the dozens of companies that have cropped up to offer EWA services over the past decade. This year, so far, multiple states, including Arkansas, Utah, Indiana and Maryland, have passed EWA laws, and most recently Louisiana joined the group this month. Those states largely had backing from the industry, but some states, including Connecticut, have taken a stricter approach to fees and other parameters that aren't as appealing to EWA providers. Meanwhile, other EWA players are working to expand their reach. Last month, Tapcheck, another earned wage access company, integrated its EWA software into Workday's human resources software, enabling workers to request wage deposits ahead of their typical payday. Recommended Reading Jack Henry earnings grab spotlight Sign in to access your portfolio
Forbes
16-06-2025
- Business
- Forbes
Why Earned Wage Access Could Redefine The Social Contract Of Work
Arbia Smiti, CEO & Founder of Rosaly, an EWA B-Corp in France that's improving financial well-being through on-demand pay. Since the 1960s, monthly pay has stood in France—and in much of the world—as a symbol of stability and social progress. Designed for an era of predictable employment and linear economic growth, the monthly salary once met the needs of both employers and workers. But in today's economic reality—marked by inflation, rising financial vulnerability and the gig economy—the rigidity of that model is being challenged. I think the next social innovation is not about more pay but about better access to it. In France, as in many countries, financial pressure is mounting. Nearly half of French workers experience bank overdrafts at least once a year. According to the latest Panorabanques data, the average overdraft is €223. The disconnect is clear: Expenses occur daily, but pay is received monthly. While the French Labor Code technically allows for salary advances (or acomptes), this right often remains underused. Why? Because the system can be administrative, opaque and socially stigmatized—used only in emergencies, rarely encouraged by employers and poorly understood by employees. Earned wage access (EWA) offers a new approach. By allowing employees to unlock a portion of their earned wages before payday, EWA aligns income access with real-life spending rhythms. Unlike loans or credit-based products, EWA involves no interest, no debt and no obligation—just early access to wages already worked for. In countries like the U.S., U.K., India and Spain, the model is rapidly gaining ground. Fintech providers and HR platforms now integrate EWA seamlessly into payroll systems, creating a flexible, low-friction financial buffer for workers. In the International Labour Organization's April 2025 global report on EWA, survey respondents indicated that: • 52% to 85% of users reported reduced financial stress. • 50% to 86% gained self-confidence from having flexible access to their income. • 87% to 99% rated the speed of access as 'good' or 'very good.' • 60% to 87% used EWA instead of more costly alternatives like payday loans or overdrafts. The report also underlined benefits for employers: improved retention, higher productivity and reduced administrative burden linked to manual salary advance requests. France already has the legal groundwork to support EWA: The right to a salary advance is embedded in national labor law. What's often missing is modernization—both in terms of digital infrastructure and cultural perception. While American and British employers often offer EWA as a strategic HR benefit, many French companies still treat it as a marginal, manual exception. And yet, workers increasingly live paycheck-to-paycheck, and financial emergencies are rarely aligned with the calendar month. Making EWA accessible through digital, automated and secure channels could unlock a transformation—one that supports employees without disrupting company cash flow or payroll operations. Let's be clear: EWA is not a call to abandon monthly pay. It is an evolution—one that adds fluidity, not instability. When offered responsibly, with clear caps, employer oversight and zero cost for employees, EWA can become a tool for dignity and autonomy. It also responds to broader labor market shifts like freelance work, platform economy jobs and growing demands for real-time compensation. In this context, salary flexibility is not a gimmick; it's a structural adjustment to an outdated system. Beyond its financial function, EWA can reshape the employee experience. It signals trust, transparency and care. It lowers the psychological burden of asking for help. And it fits naturally into a broader movement toward financial wellness, inclusion and responsible compensation. As companies compete for talent in sectors under pressure—retail, logistics, healthcare—EWA can be a differentiator. But more than a perk, it is a response to systemic friction in the way we pay for work. For business leaders exploring EWA, the first step is to assess workforce needs: • What percentage of your employees are hourly or shift-based? • Are financial stress or overdraft-related absences a recurring issue? • How many salary advance requests do your HR teams manage manually? Next, consult your payroll provider. Many digital EWA solutions integrate with other business systems. You may want to look for platforms that provide customizable caps (e.g., 30% to 50% of salary), employer control (eligibility criteria, pause functions) and compliance with GDPR and labor laws. Equally important: Communicate clearly. Employees need to understand this is not a loan or a credit service. Offer onboarding support and Q&A sessions, and explain how usage is tracked and protected. While EWA offers clear benefits, implementation must be thoughtful: • Risk Of Overuse: Without education and caps, employees might rely on advances habitually. • Cost Transparency: Solutions must be fee-free for workers or capped at a symbolic level. Otherwise, it risks creating new financial stress. • Regulatory Oversight: In some countries, the legal framework around EWA is still evolving. France benefits from existing provisions, but global companies must evaluate jurisdictional nuances. • Cultural Shift: HR teams may need time to adapt their perception of EWA—not as a vulnerability signal, but as a wellness benefit. To mitigate these risks, start with pilot programs, monitor usage behavior and gather employee feedback before full rollout. Regular reporting and HR dashboards can help track impact without micromanaging. We no longer live in a world where the end of the month matches the end of financial need. EWA brings payroll into the 21st century. More employers and HR leaders are starting to see EWA not as a workaround but as a lever for social progress. Because when workers gain financial breathing room, businesses often gain engagement, loyalty and resilience in return. I don't think the future of work will be built on rigid pay cycles—it will be built on fairness, flexibility and the courage to rethink even our most established norms. The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation. Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
