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Redefining Payday: Earned Wage Access (EWA) Insights from Harvard Study

Survey Insights | Aug 9, 2023

Earned wage access 1 - Redefining Payday:  Earned Wage Access (EWA) Insights from Harvard Study

A recent Harvard University study delved into the impact of the burgeoning early wage access (EWA) industry on low-income earners and consumers.

What is Earned-Wage-Access?

  • Earned Wage Access (EWA) refers to a financial service that allows employees to access their earned wages before their scheduled payday. Instead of waiting for the traditional bi-weekly or monthly pay cycle, workers can withdraw a portion of their earned income as needed, often through a mobile app.
  • EWA aims to help employees manage unexpected expenses and avoid costly overdraft fees or high-interest payday loans.
  • Some EWA services charge a small fee per transaction, while others offer the service for free.

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  • Industry Growth: Previous research indicated a growing trend in the use of EWA apps. In 2020, workers accessed $9.5 billion, a significant increase from $6.3 billion in 2019 and $3.2 billion in 2018.  The growth of the EWA industry has led to discussions about its benefits, potential drawbacks, and the need for regulatory oversight.

Key Findings

  • Survey Responders:
    • Over 1,000 individuals who utilized EWA programs were surveyed.
    • The majority (80%) were gig workers or hourly-wage employees
    • 93% had credit scores below 670.
  • Usage Channel:
    • 41% of the participants accessed EWA programs via their employers
    • 40% using these services weekly. Additionally
    • 60% had used a direct-to-consumer EWA app.

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  • Fees:
    • 26% estimated they spent over $300 on various loan-related fees in the past year.
    • Interestingly, while 40% said their EWA app was free, 42% mentioned a small fee per use. The fees, though seemingly minimal, can accumulate, with 28% spending an average of $3 per EWA request.
  • Pros and cons of EWA apps:
    • Positives included budgeting advice, low fees, and reduced financial stress.
    • However, concerns were raised about high service fees, potential overdraft charges, and the cycle of continuous borrowing.

EWA Garners Attention from CFPB and some States

  • The Consumer Financial Protection Bureau (CFPB) is urged to establish clear standards across the EWA industry, given its rapid growth and the vulnerability of its users.  The EWA market has been under regulatory scrutiny, especially regarding its classification under credit regulations.
  • The study suggests that the CFPB could use its authority to demand more transparency from EWA companies, which would guide regulatory policies. The introduction of data usage and privacy standards was also recommended.
  • State-level actions are heating up:  States like Nevada and Missouri have enacted laws governing EWA companies. These laws often require EWA providers to undergo audits, background checks, and maintain payment records.

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Where to from Here?

In the ever-evolving landscape of financial services, Earned Wage Access stands out as a need and innovative solution, bridging the gap between hard work and immediate financial needs. It's a movement challenging traditional pay cycles and empowering the workforce. But as with all revolutions, questions arise, and the path forward beckons further exploration. Will EWA redefine the future of pay, or will it evolve into something even more groundbreaking?


NCFA Jan 2018 resize - Redefining Payday:  Earned Wage Access (EWA) Insights from Harvard StudyThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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