[esilver]

Doing away with fixed-duration pay periods may help workers better respond to unplanned expenses and sidestep usurious payday lenders.

I would be especially interested in seeing banks offer or partner with services like these as a way of helping unbanked low-income workers access financial services.

[philwelch]

I think this will actually increase payday lending. If you have weekly-to-monthly pay periods, you get a paycheck approximately when rent is due so you can pay your rent. If you got paid daily after every shift, there’s nothing stopping you from blowing that money and failing to save up for rent, so you have to borrow your rent money at the end of the month.

[esilver]

You may have a point; workers could start living instant deposit to instant deposit instead of paycheck to paycheck. But I don’t think this is as likely.

I’m inclined to think workers who would have turned to payday lenders in the past to pay for groceries or a cell service bill might instead wait until after their next work day to initiate an instant deposit. It’s easier to do so in an app than it is to visit a payday lender, after all.

[grawprog]

I've worked with many day labourers who get paid daily, their money is gone before they get home. I also worked a job where I got paid weekly instead of bi-weekly or monthly, it was almost impossible to save money. I don't know why, but I find it much easier managing money being paid every two weeks than in durations shorter than that.

[philwelch]

In those situations, I've had my paychecks deposit into my savings account and "pay myself" out of that savings account at the first of the month. I would recommend this algorithm in general, actually--give yourself a zero-based budget, stop around the point where it's measurably below your monthly take-home income, and then pay yourself that amount every month out of savings while backfilling your savings from your income. If you have an emergency, take it out of your savings. If your savings get big enough, dump some of it into your IRA or get yourself something nice.

I think part of it might be down to numeric intuition. If you get paid $250 a week or $1000 a month, that's the same amount of money, but $1000 is a big enough number that you think in terms of, "ok, $300 for rent, $200 for groceries..." whereas $250 per week makes you think, "hey, I can blow all of this at the bar because there's another $250 next Friday and I'm sure I can scrape up the extra $50 for rent by then". $50 per day makes it a lot easier to blow the money because you're only ever blowing $50 at a time.

And I don't want to make it seem like this is because poor people are stupid. I'm stupid. There are days when I reason, "hey, I can totally eat a pint of Ben & Jerry's today, it's just one pint, I can make up the calorie surplus some other day", but it just adds up in the long run and now I'm fat. And this is exactly the same intuitive gap that would lead someone to blow daily or weekly paychecks far more recklessly than they would blow a monthly paycheck. (Relatedly, I hear that meal planning is a good strategy for losing weight!)

[Griffinsauce]

> And I don't want to make it seem like this is because poor people are stupid.

Well, financial pressure reduces your IQ.[0] Poor people aren't "stupid people" but they can more easily make stupid descicions (and of course have no way to recover, creating a downwards spiral)

[0] https://www.princeton.edu/news/2013/08/29/poor-concentration...

[esilver]

Interesting. This comment, along with the one above, made me wonder whether a detailed analysis of this behavior has been undertaken. Pew's Payday Lending in America [0] series of reports is helpful and there are many, many analyses of the impacts of credit cards on spending. I could find nothing on instant deposit payment tools, however.

[0] https://www.pewtrusts.org/en/research-and-analysis/articles/...

[gexla]

They earned that money. What they do with it is their business. However, waiting most of a week or two can be a huge issue if you have immediate problems which can be solved with small amounts of cash.

[philwelch]

This is why saving money is a fairly sensible life strategy. If you can’t keep 1-2 days of income in savings, it’s unlikely you will react responsibly if you’re paid on a daily basis.

[gexla]

What about new hires who haven't had employment and ran through whatever savings they may have had? Another scenario is that one emergency can wipe out a month of savings when you are low income.

[philwelch]

If it wipes out a month of savings, a days income isn’t going to make a dent.

[gexla]

It doesn't need to make a dent. It just needs to put food in an empty stomach. After your emergency has taken every cent you have saved (in the month savings scenario) then a payment that same day will feed you.

[toomuchtodo]

Sounds like something traditional payroll providers will provide as soon as the market is proven (and is easily accomplished with ACH modernization in progress).

I’m interested in how it changes loan interest accrual at scale, as you can now pay loans off faster if the pay cycle is tightened.