FinTech Allows Employees Free Instant Access to Pay for Hours Already Worked in Pay Period and Reduces Need for High-Interest Payday Loans
It’s a situation that almost every American has found themselves facing at some point in their lives; payday is four days away but an immediate financial need arises that won’t wait those four days…a sick child, a cut-off notice on a bill or a blown water pump on the car that takes you to and from work.
Or, in the case of recent events, a hurricane that puts you in harm’s way and threatens to take everything.
Too often these kinds of financial emergencies result in American workers turning to quick-fix payday or automobile title loans that involve interest rates that can run as high as 391 percent and where borrowers typically pay more in lending fees than they originally requested in actual credit.
Financial technologies company Instant Financial, headquartered in Vancouver, British Columbia with US offices in Tampa, Florida, has an answer that companies of all sizes, large and small, are embracing as a way to provide additional financial security to employees and increase employee retention; instant and free access to pay for hours already worked.
The concept, says Instant Financial co-founder and CEO Steve Barha, is simple; utilizing the Instant Financial system that stands alongside an employers’ existing payroll system, employees can use a smart phone app to access a portion of the payroll they’ve already earned for a particular pay period and use that money as needed…for gas, for groceries or to pay a bill that is due just before their formal payday.
Steve Barha, Instant Financial CEO
Barha, whose company services dozens of clients including major names in the restaurant and hospitality fields, understands that new technology concepts like instant payroll come with concerns about over-use or the potential for fraud and, he says, there are proprietary safeguards built into the system. What they’ve learned from actual use, he says, is that majority of the usage is for day-to-day essential expenses and not for discretionary or non-essential expenditures.
“We wanted to ensure that Instant Financial puts employees in control of their pay by allowing them to choose when they access their earned income. To accomplish this we developed numerous controls in the program to ensure that Instant is a financial wellness solution and not something that drives compulsive behavior,” says Barha. “What we’ve seen is that the vast majority of the usage is for what we expected…things like gas, groceries and bill payments. An employee who can fill a tank or replace a flat tire is an employee who shows up to the work the next day on time and less stressed. For the business owner that means not just a loyal employee but one whose mind is on work and not whether they have to go without food or leverage a high-expense option such as a payday, title or pawn loan.”
In the United States alone the Consumer Financial Protection Bureau estimates that some 12 million Americans utilized payday loans in 2015 and some 2.5 million applied for title loans racking up more than $12 billion in fees. “That makes no sense,” says Barha. “Instant fractures the need for this type of borrowing by putting employees in control of their own earned income.
“Financial technology – FinTech – has made many arenas within financial services easier and more accessible to the public over the last decade but one of the last areas is also one of the most critical to the average worker and that’s getting paid. While payment by payroll card versus paychecks was a step in the right direction, we’ve rolled out the future of how we pay employees. We allow employees an opportunity to access their own earnings around the schedule that they have to meet whether a mortgage or rent payment, a bill payment or school books and tuition payments. Instant Financial allows the employees to avoid late payment and overdraft fees, penalties and high interest rates by putting the employee in control of when they can access their pay.”