The concept of early wage access – or EWA – may be foreign to some yet is vital to millions of others. At its core, it is a way for employees to access their pay before the payroll cycle commences. I am a big fan of this concept and hope to see blockchain technology's positive impact on the EWA initiative.
The Payday Loan Problem
Even when working a full-time job, there will be times when making ends meet is nearly impossible. A minor delay in payroll can make the difference between a frictionless month or worry over finances for the next 30 days. As I have been in these situations – along with millions of others – I can confirm this is not a pleasant situation whatsoever.
For those unfamiliar, the payday loan problem consists of suers requiring a payday loan to make ends meet. Mainly low-income households need such services, yet providers charge an APR of up to 400%. It is not hard to see why, in the US, such services are illegal in 18 states. Even so, there is a high demand for payday loans, creating room for alternative solutions.
It breaks my heart to see the people who rely on payday loans falling into a debit trap. As their amounts of due payments keep increasing, there is no easy way out of this loop. Such a vicious cycle often results in loss of property, health issues, and other mishaps. For an industry that collects $9 billion a year in loan fees, such long-term negative effects on its clients require a different approach.
One option to explore is regulating the payday loan industry even further. Three in four Americans see merit in this approach, yet it remains up to policy makers to render a final verdict on these matters. The impact of payday loans on society is often ignored, yet the business can trigger genuine problems on a personal level.
Why Early Wage Access Is Necessary
Thankfully, the growing reliance on payday loans may be coming to an end soon with the help of early wage access, or EWA.It is a viable solution to the payday loan problem affecting millions of people. Getting early access to [a portion] of one’s wages is a viable solution and removes the need for services charging high APRs. However, the concept needs to be introduced in a way that prevents abuse and misuse.
For example, I see merit in a system where employees can access EWA benefits a maximum of three times per year. Allowing for around-the-clock access to early wages would be counterproductive and can lead to consumers losing control over their financial situation even further. That needs to be avoided at all costs. Moreover, I favor imposing limits on how much an employee can take out of their wages through this solution. The total amount is hardly ever necessary, so it shouldn't even be an option.
Being under financial duress is counterproductive for everyone. When monetary concerns are on the mind, work will suffer in the long run. Alleviating these concerns is possible through a system such as early wage access, although it needs to be implemented correctly. Offering it as an incentive or option to workers can improve loyalty and productivity. Implementing the feature may require a bit of work, but it can pay off in spades.
Different Types Of EWA Services
In the traditional world, early wage access will be implemented by companies through third-party service providers. While this approach is valid, it also introduces many intermediaries, which isn't always ideal. Having too many "chefs in the kitchen" to determine who gets access to this service and its specific limitations can prove problematic. A conflict of interest or opinions will hinder the employees more than anything.
At the same time, I can understand the need for so many intermediaries at this stage. The concept of early wage access is still relatively new, and it will introduce new logistical and financial challenges. Several fintech-oriented providers offer this service to enterprise clients, although their implementation, requirements, and features will vary greatly. A unified framework for EWA will be beneficial, although it may take years to establish.
Introducing blockchain-based solutions to this equation can benefit millions of people. BlockWRK is one such company that I keep close tabs on in this regard. At its core, the company provides a mobile application to let employers offer different employment benefits to workers, including free telemedicine services, psychological support, and an early salary.. By creating a multitude of benefits, the company highlights the potential of blockchain-based technology, as it allows for broader customization and integration.
Moreover, blockWRK succeeds in eliminating the cost of using traditional EWA services. While its concept is not entirely new, it provides several benefits. Rather than acting as a payroll processing firm, blockWRK works together with such providers and employers. Through blockchain and cryptocurrency, users pay a flat fee of $5 to access their wages before payday. Future wages are converted to the WRK token and are usable through a Visa debit card to pay bills or obtain cash from an ATM.
Closing Thoughts
There are many things I like about early wage access or EWA. Sooner or later, we all find ourselves in a financial pinch where quick access to cash becomes necessary. Rather than asking friends or family for money, obtaining early access to one's wages can make a big difference. Moreover, there are different ways to issue the funds to workers, including linking it to a Visa payment card.
Making life a bit more comfortable for workers can do wonders for any business. Employees are under tremendous pressure every day, and financial worries only exacerbate the situation. I hope to see more widespread use of early wage access, preferably with a blockchain and/or cryptocurrency angle.
