Revolut launches ‘salary advance’ scheme
The payment option will give employees instant access to money they have already earned, but have not yet been paid through the traditional salary system.
Workers can access half of their upcoming salary payment this way, with fees per transaction starting from £1.50. The scheme is free to employers and only available to eligible customers across the UK, with the EEA and US to follow soon.
Users can track their earned wages, see how much they’ve earned throughout the month or after every shift in real-time, and keep track of the money they can withdraw.
Revolt says Payday means customers won’t need to turn to credit cards or payday lenders.
Nik Storonsky, CEO and founder of Revolut, said: “We believe in the importance of making financial wellbeing accessible to all, and this includes focusing on the impact of financial stability on employees’ mental health. After the difficulties of the past year, the last thing employees need now is financial uncertainty and stress
“It is important to move away from a situation where many are dependent on payday loans and expensive short-term credit, a reliance that is exacerbated by the monthly pay cycle.”
However, salary advance schemes are not covered by credit rules and remain unregulated in the UK, prompting financial experts to warn that the schemes could lure borrowers into a cycle of debt.
James Andrews, senior personal finance editor at money.co.uk, said: “While the introduction of this new product is being touted by Revolut’s spokespeople as a way for employees to ‘cover expenses or necessary costs, and avoid getting into debt’ – in reality it could exacerbate the issue of overspending in cases of staff that may already be in a financially vulnerable position.
“Revolut are framing the ‘Payday’ offering as a solution to help working Brits who may be struggling with their finances. But how many will realistically be using it as a way to rid themselves of accrued overdraft charges and expensive credit card debts? And how many will simply see it as another form of free money, or as an excuse to live outside of their means more regularly throughout the month?
“Someone budgeting responsibly who already has a savings buffer to cover unexpected bills will see very little benefit from this, which means it’s only helpful to people who are already close to the edge financially. I don’t think it’s unreasonable to say that this is a dangerous product, despite being promoted as an alternative to payday loans and expensive short-term credit.”