Payday pressure: looking to flexible salary solutions

Releasing liquidity through On-Demand Pay: the $1tn opportunity.

This report offers a perspective on the On-Demand Pay market, the broad range of needs it can address for consumers and the benefits it can generate for employers. On-Demand Pay offerings enable employees to better align income and expenses by accessing a portion of their accrued wages, in advance of pay day, with the remaining portion paid at the end of the pay period. Unlike salary-based lending or payday loans On-Demand Pay does not involve borrowing on the part of the employee, and usually carries little to no cost.

The main use case for On-Demand Pay is that of everyday financial pressures, which we have found to be widespread: 70% of individuals in the UK and US experience financial stress regularly. Half of these individuals have faced a financial shortfall between pay periods and encounter this issue approximately every four months. The negative impacts for individuals are considerable: nearly 75% of those who have experienced financial difficulties have reported material deterioration in their health and wellbeing. When this stress is carried into the work environment it manifests as distraction, absenteeism, reduced performance and ultimately employee turnover. 20% of employee turnover is attributable to financial stress and we estimate the combined effect of this to cost employers in the US and the UK c.$300bn annually.

It is important to note, that On-Demand Pay solutions can offer utility not just to lower earners or individuals of lesser financial means. Access to earned income can give all employees far greater control over their finances by enabling them to more effectively align income with expenses, allowing better budgeting and supporting their financial wellbeing.

Whether the full potential of On-Demand Pay is realized will depend on several factors, such as an accommodating regulatory environment, alignment with employer priorities and consumer adoption. What is clear is that it offers a compelling economic case for employers and materially better financial outcomes for employees when compared to the many alternative financing options.