The next new balance: Pay
For years, consumers have looked to their traditional account balances as a means to determine their available funds, purchasing power and, ultimately, net worth. For the lucky few, that meant adding up various amounts across checkings, savings, brokerage, 401(k), etc. But for the vast majority of us, it was probably limited to the balance in our checking account, with maybe a few dollars in savings.
At DailyPay, we believe that there has been a critically important balance that has been absent from the consumer’s overall financial profile. As a working person, your real-time “net worth” should also include what you’ve earned up to that minute as a paid employee. We call that the Pay Balance.
After all, those earnings are your money. If you were to quit today or be terminated by your employer, you wouldn’t lose that money. Your employer is obligated to pay you those earnings for the hours worked.
What is the Pay Balance?
We have spent the last five years building technology that determines a consumer’s Pay Balance. Through our platform that has over 200 integrations with leading payroll, time and attendance, and human capital management software providers, our unique and proprietary funding model, and our over 6,000 connections into the banking system, we can now provide tens of millions of employees with their real-time Pay Balance.
The future we see is one where a consumer can use her Pay Balance as she would any other balance in any other account, as she earns it, in real time. Consider the following situation:
Unfortunately, this situation is all too familiar to so many Americans. According to The Pew Center, 41% of consumers with a median annual income of $35k have a checking account balance that is $1k overdrawn. If this consumer had a bill to pay, she would most likely pay the bill late, overdraft her account, or even potentially borrow from a payday lender.
Now consider the bank account of the future that includes the Pay Balance:
This is a more accurate picture of this consumer’s financial profile. She does have enough money to pay for her bill. Her Pay Balance is not an advance. It is not a loan. Her Pay Balance is her money. Plain and simple. In this sense, it is just like any other balance, in any other account. And in fact, in this example, accurately reflecting that balance is the difference between this person paying a bill versus not.
A Pay Balance has nothing to do with early or earned wage “access”
When we take out money from our checking account, do we call that “checking account access”? No. We call that getting “my money.” That is because your checking account has your money.
When we started DailyPay five years ago, the existing paradigm was that payday was on a discrete day, chosen by the employer. And so naturally, if a consumer received money for hours worked prior to the scheduled payday, the experience was that she received that money “early.” In other words, the reference point still was the scheduled payday in the future.
Through our technology and the creation of the Pay Balance, this paradigm changes completely. The Pay Balance is simply a digital representation of what is already yours. The Pay Balance increases as you work. This creates the effect that you’ve already been paid.
Think about the last time you woke up on your scheduled payday and checked your bank balance. My guess is that the experience went something like this:
- You woke up.
- You checked your bank balance.
- You saw the deposit from your employer.
- You saw that your checking account balance went up.
- You said to yourself “Awesome, I just got paid.”
How do you know you just got paid? It’s not as if you saw your employer haul a wad of cash to the bank and deposit it into your account. For that matter, for most of us, it’s not even as if you received a physical paycheck and deposited it at the bank. Nope. You simply saw your checking account balance go up.
It’s no wonder why when our users see their Pay Balance increase, they also assume that Balance represents money that is already theirs. And that assumption would be correct. Because it is.
So Now What?
Assessing the current financial system
The current way money moves throughout the system can be simplified in the following flow:
- An employer pays you for work you’ve performed into your bank account
- You then use that money to pay bills or consume goods/services
- Those billers and merchants are employers who then pay their employees (including you).
Our mission at DailyPay is to leverage our technology to rewrite these invisible rules of money. By leveraging a real-time Pay Balance, we create value for all stakeholders in the financial system. Now, consumers can use, consume and save their Pay Balance as they earn it. Merchants benefit from the ability to connect with their shoppers as they earn, and financial institutions can open and provision accounts with a consumer’s Pay Balance.
So where do we go from here?
Over the past few years, we have partnered with leading employers to ensure their employees have a complete and accurate picture of their real-time financial profile. Our users check their Pay Balance, on average, six times a week and may decide to spend from that Balance about once a week.
We see a world where users can pay for goods and services directly from their Pay Balance. We see a world where they can provision other accounts directly from their Pay Balance. In short, they can do anything with their Pay Balance that they can do with cash in their checking account.
This is how the world should work. A simple, continuous movement of money from the minute you earn it to becoming immediately usable. We are building a new financial system, one that starts working, the minute work starts. One where money is always in the right place, at the right time, for everyone.
Want to join us? Check out dailypay.com/careers if you want to be part of something unforgettable. I promise you, this will be the best time of your life.
Regulators and consumer advocates understandably have some concerns about changing something as long-standing and important as when people are paid. This is groundbreaking and radical stuff. We get it. And our brains want to fit this into an existing paradigm, when the truth is, there really is none.
One common question I receive is whether providing on-demand pay is tantamount to lending. The answer definitively is this is absolutely not lending. This literally has nothing to do with credit. Would you call withdrawing money out of an ATM a loan? No, you wouldn’t. That is because the money in your checking account is your money. In the same way, your Pay Balance is your money. Through our technology, we have made that balance immediately usable, consumable, spendable and saveable. Just like your money. This has nothing to do with credit. Literally nothing.
Another question that comes up is how do you protect employees from “over using” their Pay Balance? This concern is based on the wholly incorrect premise that the money the consumer received is some type of loan or advance that needs to be repaid. As we just established above, this definitively and categorically is not the case. One’s Pay Balance is simply one’s money. Period. In fact, unlike bank checking accounts, it’s impossible for someone to spend more than they have in their Pay Balance. Would you tell an employer to “run payroll less frequently, like monthly or bi-monthly” so employees don’t spend their money? No, you wouldn’t.
Lastly, some might ask if giving employees immediate access to their Pay impacts saving and spending. Again, the Pay Balance is the same as money in an employee’s checking account. That’s the paradigm shift. Our users get that. They got it long before the rest of us did. They ask themselves “Would I take out money from an ATM machine simply because I ‘could’? Uh, no, I wouldn’t. And neither would you. In the same way, our users spend from their Pay Balance when they need to, not simply because they can.