By Rob Nardelli, Director of Commercial Banking, DailyPay
By Rob Nardelli, Director of Commercial Banking, DailyPay
Financial equity and inclusion means ensuring individuals have equal access to financial systems, products and services, and ultimately, wealth. For America’s leading employers, providing financial equity and inclusion for their employees has never been a higher priority. By joining the RTP Network, the Federal Reserve’s new FedNow real-time payments system is joining forces with recent innovations in payments technology, which can help support financial equity sorely needed for tens of millions of working Americans.
Recent data shows household debt hit an astounding $17.05 trillion in the first
quarter of 2023, which is an increase of $148 billion from the previous quarter. Not surprisingly, many Americans are thus having trouble paying bills on time. Last fall, a study by LendingTree revealed that about a third of Americans have paid a bill late in the last six months.
However, sometimes it’s not just about having funds to pay bills – it’s about having those funds available to you. And most importantly – the timing of that availability.
Because for millions of working Americans, the ability to pay bills can come down to something as simple as timing. Timing of the bill due date. And timing of pay.
With the rise in popularity of earned wage access, America’s leading employers can provide working Americans the ability to access their earned pay on-demand to coincide with the bills’ due dates. With earned wage access, once you complete a shift, the money you’ve worked for is available to you without having to wait for an arbitrary, scheduled payday.
To meet this growing demand, instant payments systems need to make these everyday payments faster and more convenient. Fortunately, there are companies such as The Clearing House (TCH), whose RTP® network has set the industry standard in money movement for real-time payments, and Visa, who deploys push to card payments via Visa Direct. And now FedNow enters the space.
FedNow, partnering with earned wage access providers, can join innovators such as TCH in providing the infrastructure to move money from employers’ financial institutions into the pockets of employees when they need it most. Today, the RTP network is already carrying payments from over 150,000 employers. And that’s helpful with both TCH’s and FedNow’s missions to work with banks and credit unions of all sizes any time of the day, on any day of the year. Also, having TCH, the largest private sector payments operator in the world, and the Federal Reserve backing the real-time payments rails in the United States provides a level of security and peace of mind, as security and fraud prevention are high priorities for businesses, financial institutions and workers. Because when a bill is due, speed and safety can make all the difference in the world.
When an employee can access their earned pay on-demand, they are empowered to pay bills on time, avoiding exorbitant late fees, taking on credit card debt, or other costly options. And those fees and expenses can be financially crippling. For example, according to the CFPB, Americans pay $120 billion a year in credit card interest and late fees.
In many cases, those who are saddled with these extra fees are the ones who can afford it the least. Research shows about 12 million Americans take out payday loans each year, spending $9 billion on loan fees. This creates a never-ending cycle that disproportionately targets underserved communities. FedNow along with the existing RTP network, in partnership with earned wage access providers, can help break this cycle and level the economic playing field. In fact, with earned wage access, 8 in 10 users who were previously reliant on payday loans in some way stopped using payday loans and were able to embark on a path of financial wellness and a brighter tomorrow.
Earned wage access allows employees to access their earned wages before the scheduled payday, providing financial flexibility and helping them meet immediate expenses.
Financial equity refers to the fair distribution of financial resources and opportunities, ensuring that all individuals have equal access to financial systems and services.
Household debt is the total amount of money that all the members of a household owe to creditors, including mortgages, credit cards, and personal loans.
Financial inclusion is the process of ensuring that individuals and businesses have access to useful and affordable financial products and services.
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