Earned advance providers in the US, such as PayActiv and DailyPay, are well established and have been introduced as an employee benefit to some of the largest employers in the country.
Evidence from both the US and the UK indicates a high adoption rate of earned advance services when introduced.
The most extensive analysis, conducted by The Harvard Kennedy School in the USA, found evidence of improved employee productivity and retention.
It concluded that employer provisions of earned advance services, “are associated with materially lower employee turnover rates, which could potentially save them tens to hundreds of millions annually.”
An important corollary to the introduction of automated salary advance service is the emphasis that must be placed on user privacy.
Research indicates that part of the appeal of PayDay Loans is their confidentiality. Transactions are conducted in a non-judgemental context and users welcome this aspect, particularly when compared to the alternative, less dignified options.
We respect the dignity of our users and recognise the importance of maintaining confidentiality in order to alleviate recourse to PayDay Loans.
As such, it is not the policy of Level to share transaction details with employers as a matter of course.
Any assessment of earned advances must take into account the shortcomings of the status quo.
The continuing success of PayDay Loan providers indicates persistent demand for low-value borrowing to offset short-term exceptional expenses. Providers that presently meet these needs all serve to compound long-term cycles of debt.
Advances in financial technology from ‘fintech’ startups bring wide-reaching, long-lasting change and will establish new norms of financial management.
In May 2018, Todd Baker and Snigdha Kumar, as part of research undertaken into earned advances, remarked upon, “the enormous potential for FinTech financial solutions delivered through the employee channel to improve financial health and reduce stress among low-income working Americans and significantly reduce the turnover costs of large employers.”
Level believes the earned advance will make an equivalent impact upon working people in the UK.
The earned advance is the most risk-reduced solution to low-value, short-term financial needs.
With appropriate safeguards in place, it will become a pervasive employee benefit, offered by almost every large employer within the next 5 years.
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