Key findings of first-of-its-kind quantitative study and analysis shows:
- Use of service results in over $1,000, on average, annual savings for workers
- Daily pay benefit substantially decreases reliance on overdraft, payday loans and late fees
- Users are 20x more likely to make large monthly payments, confirming prior academic research
As governments across the country are trying to prop up companies and ensure corporate liquidity, concerns are rising about the financial health of the average American worker.
Concerned about ensuring liquidity for workers on Main Street during this crisis, DailyPay, the leading on-demand pay provider, just announced a first-of-its-kind quantitative report that analyzes how worker access to liquidity impacts their financial health.
“This is a groundbreaking initiative to finally solve the mystery of exactly how and how much on-demand pay impacts the average worker’s bottom line,” said Jeanniey Mullen, Chief Innovative Officer at DailyPay. “DailyPay is excited to release these results to help inform stakeholders, regulators and the average American just how important it is to help workers struggling to live paycheck to paycheck.”
The study results, which were taken from surveys of over 1,500 workers using the service, contain multiple key findings. First, the study sought to determine whether on-demand pay is, in fact, being used as a replacement for alternative, more predatory financial solutions, like overdraft fees, late fees and payday loans.
“While each experience is unique, through user reports on amounts saved, we estimate that the average worker saves about [$99] per month by having access to an on-demand pay service,” said Matt Kopko, Vice President of Public Policy at DailyPay. “Our study determined this number by asking workers how much they were spending on things like overdraft fees, late fees and payday loans before and after using DailyPay. Controlling for users who have had access to the service for a considerable people of time, the savings are substantial.”
Second, the survey asked people how much they have to continue to rely on financial stopgaps, like late fees and overdrafts, to make ends meet. Before access to services like DailyPay, almost 70% of people had to resort to overdraft and late fees to make ends meet. After having access to the service, that number plummets to just 26%. This means that over half of all people who were previously using these punitive products no longer have to do so at all and, across the board, the frequency of using those products goes down after having access to DailyPay.
Heavy users of predatory alternatives were also those most likely to benefit. Before using DailyPay, over 40% of respondents reported that they were charged an overdraft or late fee at LEAST once a month. After using DailyPay, that number plummets to less than 10%. This means that more than 3 out of 4 people who were regularly incurring late fees or overdraft fees no longer do so because of services like DailyPay.
“The fact that our service so clearly helps those most in need keep meaningful money in their pockets really validates our mission,” said Jason Lee, CEO of DailyPay. “We are in the business of giving people financial freedom, and to see an exhaustive survey like this confirm the extent of how much this service is improving people’s lives really motivates us to focus and keep growing.”
On-Demand Pay and Living Paycheck to Paycheck
In a world where more people are living paycheck to paycheck, and where gig work is on the rise, some in media and policy circles have begun asking whether daily access to pay helps or hurts long-term financial wellness.
The leading academic research on this issue, from Columbia University, studied payday spending habits and reached important conclusions. In the study called, “The Liquid Hand-to-Mouth,”[1] Columbia University Professor, Michaela Pagel, and her co-author confirmed through data the intuitive experience everyone has on payday — the urge to “splurge.”
The study confirmed that, across the board, people “splurge” on payday, and unfortunately, those least likely to afford it splurge the most; low-income people splurge over 3x as a portion of their income compared to higher income groups.
DailyPay’s study is consistent with these findings. While 85% of respondents said having access to DailyPay makes them more able to pay large monthly expenses like rent, utilities, auto payments, etc., only 4% said it makes them less able. So by a margin of over 20:1, working Americans know that constant access to their earnings makes them better able to pay their bills on time, and less likely to splurge.
In addition, approximately 75% of users say that having access to their pay daily reduces their financial stress.
[1] https://economicdynamics.org/meetpapers/2016/paper_789.pdf