food for thought cloudMany credit unions, particularly those engaged in payroll deduction, will be monitoring the progress of salary advance schemes. Digital software providers, such as Hastee or Wagestream in the UK, integrate with payrolls to enable employees to access a proportion of their salary (pre-set by the employer) in advance of their payday. The two immediate issues arising for credit unions are whether this kind of lending is in the best interests of employees (and many believe it is not), and how to compete against the proposition.

But right now, I want briefly to offer another take on this, which I think could become of much more profound issue in the future. The proponents of salary advance would argue that it is enabling people to access money they have actually already earned. The vast majority of workers get paid in arrears: there is a range of reasons why this is the case, including the technical challenge for employers of working out what people are owed, especially when taking overtime into account, and also a sense of holding the commitment of the employee. What salary advance technology does is remove the first of these considerations. In an employment market increasingly characterised by modern piece-work, zero hours arrangements, or ‘gigging’, where people may not work for a whole month for an employer, and where younger people in particular are unused to needing to wait for goods to be purchased, food delivered or anything else accessed, it seems likely to me that workers will start to question why they have to wait weeks – or even days – for money they earned today.

If the technology is available to work out how much I am owed for the shift I did in a bar last night, why shouldn’t I get access to that money now? It’s the digital equivalent of cash-in-hand. And if that’s the case, what is the logic of my credit union asking me for a monthly repayment plan? My income is no longer based around a monthly schedule, so why would I want my loan repayments to be? I don’t know what the answer is to this, but I think the behavioural change from same-day wage earning could have significant implications. I’ll expand on this thinking in a future article – would welcome feedback.

Nick Money,