SOCIETY AND CULTURE How earned wage access is powering financial inclusion

Jim Hawkins, a professor of law at the University of Houston, has been studying short-term consumer lending for almost two decades, publishing multiple papers on topics ranging from auto finance to funding fertility clinics. When he came across a new way to help people make ends meet, known as earned wage access (EWA), he was fascinated. “Earned wage access products have the potential to end the 30-year reign of payday lending,” Hawkins said.

EWA companies use innovative technology to provide employees with access to wages they have already earned — ahead of their official payday. Crucially, these companies charge much lower fees than those collected by payday loan firms. EWA is already popular, and operators of Wendy’s¹ franchises use it. Meanwhile, a global report from the International Labour Organization in April 2025² revealed that up to 85% of EWA users experienced reduced financial stress, and that employers linked EWA to improved retention and higher productivity.

Inspired to research EWA in depth, Hawkins discovered it could have a vast impact. “Technology does not always make life better for lower-income Americans, but earned wage access products are an example of how it can change markets for good,” he wrote in his paper, Earned Wage Access and the End of Payday Lending, published in the Boston University Law Review in 2021.³

How earned wage access works

“Earned wage access contributes to financial inclusion by giving underserved populations a relatively low-cost source of cash before payday,” Hawkins said. “Instead of relying on payday loans, auto title loans, or pawn loans, employees can access cash when they need it at relatively small fees.”

It works in two main ways. In the first, a direct-to-business model, a third-party EWA company partners with an employer, gaining access to its payroll and timesheet systems. In doing so, the EWA can see how much an employee has earned in their pay cycle so far and can deliver the corresponding wages when an employee requests them. At the end of the pay cycle, the worker receives the remainder of their salary.

The second way is a direct-to-consumer model, in which the EWA company does not partner directly with the employer, and acts independently of the employer’s payroll. Instead, it pays employees directly and then deducts the funds from the employee’s bank account after payday.

EWA firms earn a small fee for each transaction or may charge a monthly subscription fee. These fees are paid either by the employer or the employee, depending on the model used, and are usually much lower than those charged by payday lenders.

“Based purely on cost, earned wage access products, for the most part, are a radical step forward for consumers who need access to money before payday,” Hawkins said.

Growing demand

Demand for new methods of giving people early access to their wages is “very strong,” Hawkins adds. Indeed, the number of workers needing cash before payday is vast.

In the U.K. alone, for example, 39 percent of people have less than £1,000 (~$1,350) in savings accounts.⁴ In the U.S., 2024 research published by PYMNTS Intelligence reported that 62 percent of people were living paycheck to paycheck.⁵ And in India, household savings fell for the third consecutive year in 2024.⁶

“Employees can experience a higher level of financial health because EWA can supply money when it’s needed, instead of someone either going without until payday or turning to other, more expensive options,” Hawkins said. “Employers benefit if employees experience less financial distress.” If an employee has poor financial health, it’s likely to have a negative effect on their mental health⁷ and also impact their performance at work. And a stressed worker is likely to be less productive, according to the Society for Human Resource Management.⁸

Along with providing cash advances, EWA companies are expanding their range of services to include savings, where a portion of a worker’s paycheck is automatically put into a savings account. Another service tackles budgeting, where an EWA app shows how much someone has to spend after their bills are paid.

An “amazing” advance

Hawkins, who in addition to teaching is an attorney at Daniels and Tredennick, was also struck by the way these new pay-on-demand firms recoup wage advances. “What was particularly interesting to me was the ability of EWA companies to tap directly into employees’ paychecks,” he said, “because it offered such an amazing way to collect repayment.”

EWA companies are likely to have access to rich data on how much an employee earns, as well as their working hours — information that payday lenders are unlikely ever to see — which helps the EWA firm analyze an employee’s ability to repay the advance.

“Even fintechs using sophisticated credit risk analyses don’t have direct access to that type of information,” Hawkins said. Having it means that employees using EWA services “almost never” default on repayments: “My interviews with companies in this market confirm that their losses from nonpayment are extremely low.”

By contrast, payday lenders have “serious problems” with not being paid back, according to Hawkins, which in turn means they charge borrowers a higher fee. They may also have stores to maintain and many staff to pay. In comparison, EWA apps have lower operating costs, and use technology to make smart decisions on advances.

Some companies in the EWA sector don’t use credit scoring to decide whether to advance wages, meaning this new type of pay on demand can be accessed by a wide variety of people. “Remarkably, earned wage access companies often allow any employee with a partner business to obtain an advance without regard to the employee’s creditworthiness,” according to Hawkins’ research.

Of course, EWA can be risky. It’s important for an employer to find a partner who will provide a beneficial product for their employees, Hawkins said, as well as consider that there are a variety of ways to offer pay-on-demand.

An employee might get early access to their wages but then spend it and find they can’t cover their rent at the end of the month, for example. And that’s one of the unknowns of EWA, according to Hawkins. “The idea of being paid on a weekly or biweekly basis is deeply ingrained in American culture,” he said. “Because this paradigm has dominated compensation for so long, it is unclear what effects being paid more regularly might have on employees’ abilities to budget, save, and otherwise manage their finances.” Or if they frequently access their wages ahead of payday, they may be charged small amounts that add up, Hawkins said. “The employee could end up paying a lot over time.”

1. DailyPay. Calhoun Management Improves Its Wendy’s Employee Retention Rate with DailyPay.
2. International Labour Organization | Global Centre on Digital Wages for Decent Work. (2025, April). Earned Wage Access: A Global Study on Benefits and Risks.
3. Boston University Law Review. (2020, January). Earned Wage Access and the End of Payday Lending.
4. Finder. (2025, July). Savings Statistics: Average UK Savings in 2025.
5. PYMNTS Intelligence. (2024, February/March). New Reality Check: The Paycheck-To-Paycheck Report.
6. CareEdge Ratings (2025, June). Economic Pathway.
7. CIPD. (2024, September). Employee Financial Wellbeing: A Practical Guide.
8. SHRM. (2024, May). Employee Financial Wellness Inches Up After All-Time Low.