DailyPay, the payday advance startup used by Berkshire Hathaway and Six Flags, is launching a savings product to help customers break the paycheck-to-paycheck cycle

• DailyPay, the payroll advance startup that offers earned wage access through employers, will now offer employees to route wages into their savings accounts.

• The startup is part of new wave of startups that have cropped up offering an alternative to payday lending called earned wage access - the ability to draw on cash you've earned based on hours worked prior to payday.

• DailyPay hopes that by offering the ability to autosave and roundup small amounts to put away will help users get into the habit of saving regularly.

• DailyPay is available to over 2 million employees in the US at companies including Berkshire Hathaway, DialAmerica, and Six Flags.
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A significant number of Americans are living paycheck to paycheck, causing financial stress and limiting their ability to save.

For three in 10 US adults, income can vary month to month, according to the Federal Reserve. And one in 10 adults surveyed by the Fed said they struggled to pay their bills at least once in 2018.

Payday loans have often been a last resort for those struggling to pay their bills before their paychecks arrive.

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Traditional payday loans, where consumers use a future paycheck to secure a loan today, are known for high interest rates, opaque fee structures, and the tendency to trap consumers in cycles of expensive debt.

But a new wave of startups have cropped up offering an alternative to payday lending called earned wage access (EWA) - the ability to draw on cash you've earned based on hours worked prior to payday.

Startups like DailyPay are offering consumers no-interest access to cash they've earned in a particular pay period. DailyPay partners with employers to offer their workers EWA through DailyPay's app and website.

And now, DailyPay is launching a savings product, where its users have the option to send earned wages to their savings accounts, as opposed to their checking accounts.

Contributing to savings can be challenging for those that find themselves spending most, if not all, of their paychecks. But DailyPay hopes that by offering different ways to configure savings, its users can build a habit of saving what they can, no matter how small.

Platform play

The launch of the new Save product signals DailyPay's ambitions to become a payroll platform, offering more than just cash advances on wages.

With Save, employees can draw on their earned balance and move it directly into their savings accounts at whichever bank they use.

Unlike normal pay transfers, the Save product is free, and can be set up three ways: AutoSave for regularly scheduled savings, DirectSave for ad hoc savings, and RoundupSave where employees can round up a pay transfer amount, say from $18.40 to $20, and put the additional $1.60 into savings.

Founded in 2015, DailyPay's first product was a payroll advance feature where employees can draw on cash they've earned, paying no interest. The startup charges a one-time fee per withdrawal ($1.25 for next-day, $2.99 for instant transfers), which can be paid by employers, employees, or some combination of the two.

DailyPay integrates with its clients' payroll systems to track how many hours employees work. When an employee does a pay transfer, DailyPay fronts the cash and then deducts the accessed wages from an employee's next paycheck.

Employee retention

In the payroll advance market, there are two ways to reach consumers: directly or through employers.

Startups like Earnin' and MoneyLion have taken the direct-to-consumer route, where any consumer can sign up. The likes of DailyPay, Even, and PayActiv are only available to employees through their workplaces.

DailyPay is available to over 2 million employees in the US, at companies including Berkshire Hathaway, DialAmerica, and Six Flags. Many of DailyPay's clients' workforces are paid hourly.

It's marketed to employers as an employee retention tool. Companies offering DailyPay have seen an average 41% reduction in turnover for DailyPay users, according to the startups website. Adding the ability to get paid daily on a job posting, it says, can make candidates more likely to apply.

DailyPay's 2018 Series B brought its total funding to $22 million from investors including Inspiration Ventures, Intercept Ventures, and RPM Ventures.