One of the more understandable reactions to programs allowing people access to their earned pay on demand, rather than waiting for the scheduled payday, is the contention that there will be rampant abuse of the benefit.

The claim is that many using it would, when payday finally comes around, be confronted with a zero- or close to zero-dollar paycheck, because they would have used their earnings up. And, as the argument goes, the cycle would begin again, drawing workers into a maligned dependency on this freedom to access their pay as they choose to, creating an ongoing cycle of financial hardship.

At the same time, there is the sense that the better vehicle for budgeting and financial planning, more naturally, is the tried and true periodic paycheck. That stable “you can count on it” disbursement, generally comes monthly, biweekly, or weekly, depending upon when the employer determines the appropriate frequency for their operation.

In the close to a decade since earned wage access (EWA, also known as on-demand pay) became available, however, data shows such fears are not based on reality. This is because there is overwhelming evidence that users of these programs stay out of debt and are better able to manage their finances once having access to the benefit.

In 2021 and 2022, DailyPay commissioned studies with over 1,000 of our platform users with Aite-Novarica and Mercator respectively, two independent research and advisory firms specializing in consumer protection in the technology and financial services industry. Enrolled employees in both surveys derived significant financial benefits from on-demand access to the wages they’d already earned.

In the 2021 study, 8 in 10 DailyPay users who previously had used payday loans as a financial strategy to make ends meet before having on-demand pay access said they no longer had to utilize this costly and predatory product to access cash. An additional 15% said they reduced their use of payday loans and 88% of those who stopped or reduced their use of payday loans said this was due to their participation in DailyPay’s on-demand pay program.

Equally significant in the 2021 study was the finding that of those surveyed who said they had overdrafted their bank account prior to enrolling in the benefit, nearly 8 in 10 said they no longer overdrafted their account as a financial strategy after having access to their pay on-demand, and 18% said the instances of overdraft assessments were reduced. Seventy-five percent credited their EWA program for this change.

The 2022 study done by the Mercator Advisory Group confirmed the 2021 results, despite historically high inflation beginning to impact the economy at the time of the survey. In that survey of 400 users, 77% said the program helped them save money by avoiding other more costly alternatives.

So, how can this be?

On-demand pay is desired in the marketplace, not just by employers, as an inexpensive benefit that aids in retention and recruitment, but also by employees.

A 2022 survey of workers from the management services company ADP concluded that there is an “unrealized need among workers for EWA leading to substantial adoption when it is offered.”

According to the ADP report, there is broad interest across every age group of the workers that they surveyed. The study also found that 62% of those surveyed who had access to earned wages prior to payday took advantage of the benefit every pay cycle or every other pay cycle.

Employees in some programs like DailyPay’s are provided line-of-sight into their earnings as the pay cycle progresses. Many view accrued net amounts some five to six times a week and according to internal data, 70% of DailyPay users that access the app don’t make a transfer.

They are using that information to aid in making everyday financial decisions. And these decisions primarily are to use the on-demand access for paying utility bills, buying groceries, and other family expenses, including healthcare emergencies, among other reasons, according to the ADP report.

Finally, some people use the program as a savings vehicle and to get financial wellness education. These programs can offer ways to save using the app, and also free access to reports, tools, and even counseling, to aid employees in their move toward a more stable financial future.

A 2022 J.P. Morgan report contends that with EWA, employees are receiving “access to a flexible and sustainable tool to managing their finances.”

The evidence and survey data is quite clear that employer-integrated on-demand pay is a net positive in people's lives. As these programs continue to achieve a certain level of maturity without controversy, this is just another telling indicator that EWA is an important employee benefit that helps people stay out of debt and more responsibly manage their complex financial lives.