In spite of rising concerns that the apps could be worse for consumers than the payday lenders they aim to replace, earned wage services have taken off as hourly workers seek quick cash during the pandemic, fuelling an explosion of apps that have either opened for business or raised new cash in the past few months.
Some fintech investors still have questions about whether any of the apps can make money as standalone businesses or are destined to be acquired — or copied — by larger companies. Other companies are moving into their territory, such as the human resources start-up Gusto, which debuted a “cashout” service in September. Additionally, many of the apps give up a slice of revenues to so-called partner banks that manage customer deposits, an arrangement that critics argue is unsustainable. “The gatekeepers to the financial system charge you a toll that’s just too high for it to really work,” said one fintech investor.