Working Daily, Paid Monthly? Effects of On-Demand Wage Access on the Financial Engagement of Low-Wage Workers

This study investigates the behavioral impact of on-demand wage access (OWA), a financial technology (fintech) innovation that allows low-wage workers to access earned wages ahead of traditional pay cycles. Whereas OWA has gained traction as a liquidity-enhancing tool, limited empirical research has explored its effects on financial behavior and the mechanisms through which it operates. Grounded in the concept of self-empowerment, we theorize that OWA enables greater autonomy over income use, which fosters forward-looking financial behaviors such as saving, monitoring, and goal setting. We employ a mixed-methods approach that combines large-scale panel data with qualitative and experimental evidence. Our primary analysis draws on transaction data from approximately 4,000 low-wage workers at a central U.S.-based OWA platform. We find that OWA adoption leads to significant increases in monthly saving frequency, time spent monitoring financial dashboards, and the likelihood of setting explicit financial goals. These effects are amplified among users in regions with low wages or limited banking access but are attenuated among those who show immediacy-seeking usage patterns such as frequent fee-based withdrawals. To probe underlying mechanisms and rule out alternative explanations, we complement our analysis with an online experiment, an in-depth survey of 58 OWA users, and semistructured interviews with 20 independent participants. These findings converge on self-empowerment as the central psychological mechanism, as users report a shift from reactive to proactive financial management and describe OWA as scaffolding for disciplined behavior. Our study contributes to fintech and financial inclusion research by identifying self-empowerment as a key driver of behavioral change and highlighting design and policy strategies that can enhance the impact of wage-linked liquidity services for underserved populations.

History: Ravi Bapna, Senior Editor; Abhay Mishra, Associate Editor.

Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2023.0673.