PayActiv app allows workers to access their wages before their payday


Picture this: Payday is still two weeks ago, your bank balance has dwindled down to next to nothing — and then your car breaks down.

We’ve all been there — when an unexpected expense pops up right when our account is nearly empty, and payday still an agonising wait away.

But a new app is hoping to make that common problem a thing of the past — by letting workers access the wages they’ve already earned early at the click of a button on their mobiles.

The PayActiv app launched in Australia recently after first launching in 2012 in Silicon Valley in the US.

Since then, a slew of big companies such as Walmart and Jenny Craig have come on board, and 1.4 million employees from Walmart alone have signed up.

It is free for businesses to set up but costs a flat fee of $5 per transaction for employees.

There are no contracts or subscription fees involved, and workers are limited to two withdrawals per pay period and a maximum withdrawal of $1000 (or up to 50 per cent of earned but unpaid wages) as built-in protections.

Head of human resources at Jenny Craig Australia and New Zealand Joshua Nunan said financial insecurity was a “real issue” for many Aussies, and a number of staff members had already used PayActiv since Jenny Craig signed up several months ago.

“Unexpected things happen in life — whether it’s a bit of bill shock or getting a flat tyre — and sometimes you need to tap into a pool of funds, but a lot of Australians find that difficult,” he told news.com.au.

“For us it made sense to enable employees to tap into their own wages a little early without necessarily sparking up a conversation with their manager, which can be a bit awkward.

“This isn’t meant to be used all the time, and we’d prefer staff not to find themselves in that situation in the first place, but we understand life happens, and if people do find themselves in a tough situation, there is that safety net.”

The local launch of the app comes after recent research revealed one in three Australians don’t have $500 up their sleeves in case of an emergency.

Those who find themselves in that situation face a tough choice — go without, put the expense on their credit cards or opt for risky, high-interest loans.

Those findings are backed up by research from comparison site finder.com.au, which revealed 57 per cent of Australians — or more than 11 million people — don’t have enough spare cash to survive a $5000 emergency.

Of these Aussies struggling with their savings, one in four would rely on their friends and family to bail them out, while 13 per cent would turn to a personal loan.

One in eight would have to put it on credit card, 5 per cent would draw from their superannuation and 3 per cent would take out a payday loan.

Finder money expert Bessie Hassan said when times were tough, even “simple expenses” such as a dentist’s visit could be enough to “derail” some households.

She said they key to breaking the “pay cheque to pay cheque” cycle was finding “easy wins” to save cash, such as switching to a cheaper utility provider, working out payment plans or even taking advantage of hardship programs or the National Debt Helpline in dire circumstances.

But PayActiv country manager Michael McLaughlin said the app, which had been up and running in Australia for a few months already, could help people before they got to that stage.

He said many individuals were facing “incredible stress” regarding their finances, and while the app was no “silver bullet”, it was a helpful safety net for emergencies.

“It’s been proven that people who are financially stressed take an additional four days sick leave per annum, which costs the economy $50 billion a year,” he said.

“We all get paid weekly, fortnightly or monthly, but what happens if there’s an emergency halfway through that cycle? You might have to wait another couple of weeks before payday, and unfortunately some people go without, miss a bill payment which affects their credit rating, load up their credit cards even more, apply for an overdraft or go to payday lenders.

“The marketing teams of payday lenders do a remarkable job of dressing it up, but they have a huge impost on society.”

Mr McLaughlin said some payday lenders had interest rates of 200 per cent per annum, and up to 1.8 million Australians had taken out a payday loan.

“Now you have the ability to tap into your own wages — you don’t have to seek credit or go to your manager to ask for a pay advance,” he said.

“It’s only for emergencies — it’s not an ATM, it’s a fallback safety net — but we believe you earn your money, so why not access it (when you need)?”

He said the payroll system was outdated and in need of “disruption”.

Continue the conversation @carey_alexis | alexis.carey@news.com.au





Source link Finance News Australia

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