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  • Writer's pictureAdam Wrona

Pay on-demand as a remedy for liquidity problems in personal finance

Adam Wrona describes the pay-on demand solution as an employee benefit that can help stabilize the liquidity of the household budgets

You may have felt the stress of an urgent situation - an unpaid electricity bill, another loan instalment, a sudden accident, are just a few examples that could happen to any of us.

The consequences of financial problems have many faces — from a temporary deterioration in health to the need to take up another job. They have an impact not only on ourselves, but also our relatives, family, and the motivation of our team, which directly impacts our performance at work.

At such moments, while trying to deal with the situation, we impulsively spend hard-earned savings, sell our securities, seek help from immediate family, and in some cases, take out short-term, high-interest loans.

On-demand pay may be the cure for our financial problems.

Employers can offer on-demand pay to their employees as a benefit, usually through third parties, enabling them to receive their wages as they earn them. The employees can collect the salary they have already earned before the formal payment date. Depending on the service provider, they can have access to their earned wages and the number of advance payments. The pay-out is usually made in a short time through a platform or application paired with the employer. The money paid is then deducted from the salary or debited to the employee's account.

This comes as a relief to employees because nearly 1 in 3 workers run out of money before their next payday and 60% believe their financial situation will improve if their employers allowed them immediate access to their earned wages.

Companies that offer this type of service usually operate on a subscription model, where the employer pays either a full or partial subscription for each employee, depending on the firm. These firms cover the costs of on-demand payment and later settle accounts with employers at the end of the billing period.

According to an EY report , the market for On-Demand Pay is valued at $1 trillion in OECD countries. More than 70% of employees have struggled with financial difficulties in the last 12 months affecting their productivity, and the annual cost to employers because of the loss of productivity in the US and the UK is $300 billion.

In my opinion, this is a market full of opportunities and expanding rapidly. We are facing a problem on a large scale that has previously remained unsolved. How beautiful yet simple the solution is, isn't it?

In my next article, we will delve deeper into the market of on-demand pay services and solutions offered by individual companies.

The UCL Finance and Technology Review (UCL FTR) is the official publication of the UCL FinTech Society. We aim to publish opinions from the student body and industry experts with accuracy and journalistic integrity. While every care is taken to ensure that the information posted on this publication is correct, UCL FTR can accept no liability for any consequential loss or damage arising as a result of using the information printed. Opinions expressed in individual articles do not necessarily represent the views of the editorial team, society, Students’ Union UCL or University College London. This applies to all content posted on the UCL FTR website and related social media pages.

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