The challenges of salary advance schemes

The recent publication of the Woolard Review marks a turning point for Employer Salary Advance Schemes (ESAS), the payment innovation sometimes known as ‘On-Demand Pay’.

The Woolard Review is the latest report by the Financial Conduct Authority (FCA) into ‘change and innovation in the unsecured credit market’ and focusses exclusively on Buy Now Pay Later (BNPL) and ESAS services.

In the report, the FCA states that Salary Advance schemes “…have benefits for users. Employees can use them to ‘smooth’ their income throughout the month to better manage regular monthly spending or deal with unexpected or emergency expenditure. Depending on how they are used, they can be a low-cost, easy-to-access alternative for people who may not be able to access mainstream credit. There is no need to actively repay anything at the end of the month as withdrawals are automatically deducted as part of the payroll process.”

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