Earned Wage Access: How Banks Can Do Better for Workers Facing a Cash Pinch

The Consumer Financial Protection Bureau dealt fintechs focused on earned wage access a body blow when it issued an interpretive ruling in July that indicates that their products will be considered loans subject to the Truth in Lending Act. This would rebalance the playing field in the $22 billion market by significantly weakening the business models of Clair, DailyPay, PayActiv and other fintechs—and it would reopen the door for banks and credit unions that address a customer’s cash pinch with earned wage access functionality, competitive short-term loans and funds advances, and digital banking features that can help customers break the cash-crunch cycle. 

This report explores the rationale behind the CFPB’s interpretation, the impact it could have on fintechs, the opportunities for banks and credit unions, the current market landscape for earned wage access and the B2B and B2C models, and how fintechs are actively trying to disintermediate banks. The report compares leading fintech fees based on annual percentage rates and highlights the strengths that FIs can use to challenge the fintechs.

Key questions discussed in this report: 

• What does the CFPB’s recent interpretive ruling mean for fintechs focused on earned wage access and traditional financial institutions? 
• How do earned wage access products work? 
• How are these fintechs disintermediating banks and credit unions? 
• Can banks and credit unions offer better options for customers facing a cash crunch? 
• What advantages do FIs have in serving customers in a cash pinch?

Companies Mentioned: 

AllPoint, BMO, Branch, Citizens Bank, Clair, DailyPay, Earnin, Huntington Bank, Immediate, One, Netspend, Pathward, PayActiv, PNC, Santander, TD, U.S. Bank, Visa, Wells Fargo, ZayZoon