Earned Wage Access: Considerations for Policymakers

EarnIn’s mission is to build products for a more equitable financial system and a better life. People have responded with more than 3 million Americans opening the EarnOn App in 2020, and more than 1.3 million using it to Cash Out¹, EarnIn’s Earned Wage Access (EWA) product. As of September 2021, EarnIn has performed more than 125 million transactions and provided access to $10 billion in earnings for its members.

With the cost of goods and services rising rapidly, more and more hardworking Americans are living paycheck-to-paycheck and battling a financial system seemingly more focused on engineering new fees than extending the economic ladder people deserve.

This is made worse by a restrictive payment model that favors employers at the expense of employees – forcing them to wait two weeks to get paid for work they have completed. The result is a “liquidity gap:” the dynamic when people have a paycheck coming next week, but have to pay for rent or groceries this week. Over time, this forces people to make impossible choices between meals or medications, co-pays or car payments, groceries or gas, and rent or an essential repair.

EarnIn’s Earned Wage Access tool, Cash Out, looks to end this harmful reality by freeing people from the traditional pay cycle – giving them control of their money, starting from when they earn it. Historically, Americans confronting a significant unplanned expense are forced to turn to costly forms of liquidity like payday loans and bank account overdrafts – short-term solutions that carry long-term consequences and escalate, rather than solve, cash flow problems.

Our EWA service bridges the liquidity gap for consumers who are unable to access high-interest bank loans or get approved for credit cards – avoiding financial traps and ensuring they can still achieve financial freedom and pay for essential goods and services when they need them.

EarnIn doesn't charge mandatory fees², and offers this as a non-recourse, no-interest financial tool. This means credit agencies and debt collectors are never involved, and EarnIn bears the entire risk if a Cash Out isn’t recovered – the consumer bears none. We never share data or sell customer data with third parties. Users may choose to provide voluntary “tips,” though one’s access to Cash Out or any of our financial tools is in no way dependent on tipping.

Our Direct-to-Consumer model means that anyone with a steady paycheck can use our services – regardless of employer. Any employee in the U.S. with a bank account who receives their paycheck via direct deposit can use EarnIn, including small business and government employees.

A May 2021 research study of 4,735 EWA consumers showed that EWA helps working families stuck in a traditional pay cycle with the tools they need to manage their finances. It found:

1. 92% of consumers given EWA reported that it helped them to pay bills on time, avoid overdraft fees and payday loans, and become less dependent on credit cards; empowering them to achieve at least one of their financial goals in 2020.

2. A strong majority of EWA users reported a boost in their overall well-being after using the service. Eight in 10 reported feeling less stressed about their financial situation (82%), having higher self-esteem (81%), and an improvement in their mental health (77%).

3. An overwhelming majority of consumers (91%) said they understand how the EWA service works and understand the associated fees.

They also said that without EWA, 44 percent of users would otherwise consider not paying certain bills and more than one-third of consumers would deliberately overdraft their account or use a payday loan because of cash flow constraints.

This is a tool that must be protected and EarnIn supports regulation for EWA that creates further protections for consumers while recognizing the inherent difference between our product and traditional credit.

We continue to advocate for EWA-specific consumer protection frameworks that ensure fair and equal access to our products. We believe attempts to regulate EWA as credit would jeopardize the entire service, which is fundamentally different from both the predatory credit products that have taken advantage of struggling Americans for years and the exclusive products that make liquidity available to wealthier Americans but remain off-limits to those most in need.

Regulating EWA as credit would impact the accessibility of the product, leading to higher fees and thus further promoting a cycle of debt for lower-income Americans.

EarnIn’s comprehensive suite of tools include: Cash Out, which provides access to income as it’s earned; EarnIn Express, FDIC insured, deposit account that gives people the option to receive their paycheck up to two days early; Balance Shield, a low balance alert to help maintain a positive bank balance; Financial Calendar, to help people budget and schedule payments; and Tip Yourself, an easy way to set aside money to reach savings goals. With EarnIn’s EWA product, Cash Out, users can access up to $100 of their accrued earnings per day, and up to $500 of their accrued earnings per pay period.

¹Internal data pull from Jan 2021, based on total number of users who cashed out at least once from Jan-Dec 2020

²Fees may apply to use Lightning Speed. Lightning Speed may not be available to all Community Members. Cash Outs may take up to thirty minutes, actual transfer speeds will depend on your bank connection. Restrictions and/or third party fees may apply, see EarnIn.com/TOS for details