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Let’s say your rent is due, but you’re still a week away from your next payday. So tonight you have to choose between paying your bill on time and putting food on the table. CEO Steve Barha of Vancouver-based tech company Instant Financial thinks he has the solution.Earlier this year, Instant Financial rolled out Instant Pay, an app that allows workers to claim up to half of their day’s wages at the end of their shift. They have just one hour to transfer their earnings to an instant account, the rest of their wages are paid at the end of the cycle.“The core concept is most businesses can’t just pay their employees more,” Barha says. “But paying them better putting them in charge when they have access to their own money—it puts the employee in better control of their financial life.” With real-time mobile access to everyday services including room bookings and transportation, Barha marvels at the relative slowness of a bi-weekly pay cycle, and explains that Instant Pay brings payday up to speed with the rest of the world. Instant Financial CEO Steve Barha (photo: Carlos Taylhardat).
The notion of giving an employee instant access to their wages has raised a few eyebrows. Critics, mostly financial advisors and some employers, worry that the instant gratification of daily earned wages will promote impulse spending and discourage budgeting. This shouldn’t come as a surprise when the average Canadian household owes $1.67 in debt for every $1 earned.Barha begs to differ. “The feedback from credit counselors and payday lenders is ‘Oh you can’t give people access to their money like this.’ They really look at employees as being stupid and that’s such a derogatory statement to say that somebody can’t be empowered with their money,” he says, adding that frivolous spenders often make impulse purchases later in the day, long after their shift and the allotted hour to claim the Instant Pay offer afterward ends. Employees who need a few dollars for gas or groceries, however, can plan to withdraw what they need at the end of their shift.
The app is being billed as an alternative to payday loans with high interest rates that quickly turn into debt. According to the federal government, the number of Canadians who took payday loans doubled between 2009 and 2014—a sign of either troubling times or reduced financial literacy, and nearly 90 percent of people who turn to payday loans do so to cover basic expenses like rent and groceries. So far, Instant Pay has been most popular with chain restaurants including The Old Spaghetti Factory, Earls, McDonalds, Outback Steakhouse and Mr. Mike’s.