The world seems to go faster every year, and yet nothing seems slower than the speed at which paychecks are distributed. In the United States, work done the day after a pay period will take just two weeks to process, with a check or direct deposit arriving a week or two later. For the tens of millions of employees who live paycheck to paycheck, this delay of several weeks can make the difference between a rent check or not.
Various startups have approached this problem with different solutions, and Clair is one of the newer and more compelling offerings.
Using its own capital base, New York-based Clair offers instant and, most importantly, free pay advances to workers by integrating with existing HR technology platforms. It works with full-time employees as well as co-workers, and it offers a suite of online and mobile apps for workers to make sense of their finances and request an advance on earned wages.
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 has raised $ 15 million in Series A funding led by Kareem Zaki of Thrive Capital. , who will join the directors board. Just a few months ago, Clair announced a $ 4.5 million funding round led by Upfront Ventures, bringing its total funding to $ 19.5 million.
“Payday advance” or “earned payday advance” (there is a slight distinction) has been Silicon Valley’s euphemism for payday lending, an industry that has been plagued by allegations of fraud, deception. and rapacious greed that distracted workers from their hard work. – paychecks earned thanks to usurious interest rates.
What sets Clair apart is that its offer is free for workers. Since it connects directly to HR systems, the startup takes much less financial risk than traditional payday lenders, who don’t have access to the payroll data Clair is able to analyze.
For Simko, one of his goals is simply to see the complete elimination of the 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 is gone.” , 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 focused on the payments market. He’s kept in touch with Kostecki, their families are good friends, and the trio decided to tackle this issue, in part inspired by Uber’s instant checkout feature that he introduced in 2016 and which has met with great success.
Instead of making money on interest rates, fees, or tips, Clair instead wants to be the banking and financial service provider of choice for working people. As I noted last week about Pinwheel, a payroll API platform that owns the direct deposit relationship with a worker, but guarantees that they will do the vast majority of their financial transactions through that account. particular banking.
Clair offers free instant paychecks as a gateway to its other offerings, which include spending and savings accounts, a debit card, in-app virtual debit card, and financial planning tools. Simko said, “Our business model is to give people free access to the salary they earn, then automatically enroll them in a digital bank, then we make money the same way Chime makes money, at find out the interchange fees. “
In fact, he and the company believe in this model so much that it will actually pay human capital technology platforms such as workforce management and payroll systems to integrate with Clair in as an incentive. It offers a recurring revenue stream for HR tools based on the number of users joining Clair, regardless of the use of the software by those workers. We are “really taking the integrated fintech thesis down,” said Simko. “Employees start spending money on their Clair card, and we redistribute it to our [HR tech] the partners.”
Clair joins a number of other companies in this space, which is becoming more and more passionate as the perceived opportunity in financial services remains high among investors. Last year, the Gusto payroll platform announced that it would be moving from a simple payroll to a financial wellness platform, which is partially based on its instant payroll advances or what it does. calls Cashout. We’ve got 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 features with a tip income model. Dave just announced a $ 4 billion PSPC with VPC Impact Acquisition Holdings III.
Nonetheless, Clair’s angle is differentiated as the race to lock everyone 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, he There is still an opportunity for a complete neobank to conquer the American market.
With this new financing, 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 based on their employer’s credit score, which is the multibillion dollar idea here,” Simko said. The team is nominally based in New York City, with about half the team of around 25 people.