The American Banker released the results of a survey conducted earlier this year with 494 adults who have used an on-demand earned wage access product within the last year. For the uninitiated, on-demand earned wage access (EWA) is the ability for a worker to gain access, often immediately, to a portion of their wages before they are credited on the traditional payday. This is not a payroll advance, not a loan, but an opportunity to receive wages as they are earned to help make ends meet.
There are two points that I thought were interesting coming from this study. The first is that EWA is not just a solution for those making low wages, albeit those making more money who use EWA services use the funds for different purposes:
The most noticeable contrast in use of EWA funds was demonstrated by the fact that lower income
respondents first used the funds to pay rent while more affluent users did not. One third (33%) of lower-income users (under $50,000 HHI) said that they would use EWA funds to pay their rent or mortgage compared to 21% of middle-income ($50,000-$99,000 HHI) and 16% of higher-income ($100,000+ HHI) users.
The second finding to highlight is that users of EWA would like to receive this option through their financial institution. Perhaps this will lead to partnerships between the fintechs that are currently spearheading the development of EWA solutions and banks and credit unions:
Overall, 77% of respondents reported that they would be very likely or likely to use an EWA service if it were offered by their bank or credit union, with the highest level among millennials (79%) and the lowest level among Gen Z (64%).
This positive reception to a bank-offered service is a possible indication of an untapped opportunity for financial institutions. Currently, the EWA market is serviced largely by fintechs, many of whom are startups relying on venture funding. Square is one of the sole exceptions, being a public company, but it is not a traditional mainstream bank.
One of the factors behind interest in a bank-offered service is that most EWA users find that their bank is helpful in assisting them with managing their finances. Both millennials and Gen X users scored helpful ratings at 80% while boomers at 70% and Gen Z at 67% were slightly lower.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group