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Using a ‘salary link,’ employers can help low-income workers get access to credit. Walmart , one of the largest employers of low-wage workers, recently made PayActiv available to its employees. From December to March, 80,000 Walmart employees received more than $30 million through PayActiv.
There is a solution with benefits for employers and employees. In a new working paper published from Harvard’s Mossavar-Rahmani Center for Business and Government, we show that mobile and online financial products sponsored by employers can cover a wider range of borrowers and charge them less money than those available to individuals in the market. Use of these FinTech products may also significantly reduce employee turnover and save employers millions. The key to their success is the “salary link”—meaning the money provided to employees is automatically repaid through salary deduction. Large employers can make these benefits available today without changes in law or government intervention.
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