Chris Smith has been investigating salary advance (also known as Earned Wage Access) for the Talking Credit Unions podcast series. Salary advance works like a short-term loan, where a provider enables an employee to draw down a proportion of the current month’s (or week’s) earnings in advance of payday. The provider has an agreement with the employer that the money borrow will be paid back through payroll on payday. As these are salary advances and there’s no chance of non-payment, it is not counted as credit and is not regulated as such, meaning no credit or affordability check. There is no interest, but a fee for each early salary access.
Nick Money blogged about these schemes a couple of years ago, as they were first emerging, where he considered how they might pose a threat to traditional instalment loans. Since then, salary advance offers have grown rapidly in Britain and Ireland, and many credit unions are seeing it become very popular with employers, potentially in competition with credit union payroll deduction arrangements. Due to the lack of checks, concerns have been expressed about their suitability for some customers.
In this podcast, Chris speaks to Matt Bland, CEO at The Co-op Credit Union (a British employee credit union), Lindsey Melvin, CEO at Flexiwage (a financial wellbeing and money management app for workers), Erik Porter, chair of Fair Money Advice and consultant to Wagestream (a leading salary advance provider in Ireland and Britain) and Emily Trant, Head of Impact and Inclusion at Wagestream.
Credit unions should be aware of the salary advance proposition and ensure they are able to demonstrate the strengths of traditional loan products. Lindsey Melvin is currently writing a paper for Swoboda on precisely this issue.
Download the podcast here, where Chris also provides more information on salary advance.
The Swoboda Research Centre sponsors the Talking Credit Unions podcast series. All episodes can be found on Swoboda’s Audio page. Alternatively, you can listen or subscribe to the series on Spotify, Google Podcasts, Apple Podcasts and many other podcast apps. Just search for Talking Credit Unions.
