The world seems to move faster every year, and yet, nothing seems slower than the speed at which paychecks are distributed. In the US, work done the day after a pay period will take two weeks just to process, with a check or direct deposit coming a week or two later. For the tens of millions of employees who live paycheck to paycheck, this weeks-long delay can mean the difference in making a rent check — or not.
A variety of startups have tackled this problem with different solutions, and one of the most recent and compelling offerings is Clair.
Using its own capital base, based in New York Claire offers instant – and most importantly – free salary advances to workers by integrating with existing HR technology platforms. It works with full-time employees and also construction workers, and it offers a suite of online and mobile apps for workers to make sense of their finances and request a payday advance.
The company was founded in late 2019 by CEO Nico Simko, COO Alex Kostecki and CPO Erich Nussbaumer, and today the company announced that it had raised $15 million in Series A funding led by Kareem Zaki of Thrive Capital, who will join the company’s board of directors. directors. Just a few months ago, Clair announced a $4.5 million seed round led by Upfront Ventures, bringing his total funding to $19.5 million.
“Payday advance” or “earned payday advance” (there’s a slight distinction) have been Silicon Valley’s euphemism for payday lending, an industry that has been plagued by allegations of fraud, deception and rapacious greed that cheated workers out of their hard work – paychecks earned through usurious interest rates.
What sets Clair apart is that its offering is free to workers. Because it connects directly to HR systems, the startup takes far less financial risk than traditional payday lenders, which don’t have access to payroll data that Clair is able to analyze.
For Simko, one of his goals is simply to see the complete elimination of traditional industry. “I have a payday lender right across from my apartment in Brooklyn and there’s a long line on the 25th of every month, and I’m not going to stop until that line goes away” , did he declare. “For us, success is simply about becoming the winner of access to earned wages.”
He is Argentinian-Swiss and came to the United States to study at Harvard, where he met Nussbaumer. He ended up working at JP Morgan, which specialized in the payments market. He stayed in touch with Kostecki, their families are good friends, and the trio decided to tackle this problem, partly inspired by Uber’s instant checkout feature which he introduced in 2016 and which s turned out to be a huge success.
Instead of making money on interest rates, fees or tips, Clair instead wants to be the bank and financial services provider of choice for working people. As I noted last week about Pinwheel, an API platform for payroll, owning the direct deposit relationship with a worker, but guaranteeing that they will do the vast majority of their financial transactions through that bank account particular.
Clair offers free instant cash advances as a gateway to its other offerings, which include spending and savings accounts, a debit card, an in-app virtual debit card, and financial planning tools. Simko said: “Our business model is to give people free access to earned pay, then automatically enroll them in a digital bank, and then we earn money the same way Chime earns money, c i.e. interchange fees.”
In fact, he and the company believe in this model so much that he will actually pay for human capital technology platforms like workforce management and payroll systems to integrate with Clair as a incentive. It offers a recurring revenue stream for HR tools based on the number of users who join Clair, regardless of how often those workers use the software. We’re “really digging into the integrated fintech thesis,” Simko said. “Employees start spending money on their Clear card, and we distribute it to our [HR tech] the partners.”
Clair joins a number of other companies in this space, which is becoming increasingly passionate as the perceived opportunity in financial services remains high among investors. Last year, payroll platform Gusto announced that it would be moving from a simple payroll to a financial wellness platform, which is partly based on its instant salary advances or what it calls Cashout. We’ve covered Even, which is one of the originals in this space with a major partnership with Walmart, as well as neobank Dave, which offers payday advance functionality with a tipping revenue model. Dave comes announced a $4 billion SPAC with VPC Impact Acquisition Holdings III.
Nonetheless, Clair’s angle is differentiated as the race to lock down every person in the world with new financial services intensifies. Simko says he sees a gargantuan opportunity to be the “Alipay” of the United States, noting that unlike China with Alipay, Nubank in Brazil and increasingly in Latin America, and N26 and Revolut in Europe, it there is still an opportunity for a complete neobank to conquer the American market.
With this new funding, the company will continue to expand its product offering, exploring areas such as healthcare and debt repayment. “I can give an APR not based on their credit score, but on their employer’s credit score, which is the multi-billion dollar idea here,” Simko said. The team is nominally based in New York, with about half of the team of around 25 people.