For workers in the gig economy, getting paid as quickly as possible is a critical way to manage – to say nothing of survive on – an often-irregular source of income. And with the onset of the COVID-19 crisis, even those working in the traditional, 9-to-5 economy are feeling new levels of financial anxiety.
Responding to this challenge is Clair, a New York-based startup founded last year by Nico Simko (CEO), Erich Nussbaumer (CPO), and Alex Kostecki (COO). The social-impact fintech believes that workers should have access to their wages, without any additional fee or charge, at the end of the work session rather than at some arbitrary point in the future. This week, the company announced a $4.5 million seed fundraising that will help it fulfill its mission of enabling workers to “freely access money they’ve already earned,” said Simko in a statement.
“There are more payday lenders than McDonald’s in the U.S. that charge on average more than 300% annual interest on loans,” he said. “So we have one simple vision: it’s time for change.”
The round was led by Upfront Ventures and featured participation from Founder Collective and Walkabout Ventures. Also involved in the investment were Michael Vaughan, former COO of Venmo, and Paul Appelbaum, founder of Seamless. Combined with $55,000 in pre-seed funding the company picked up in the fall of last year, Clair’s total capital adds up to over $5 million.
Clair combines digital banking functionality – complete with savings account and debit card – with an Instant Pay Access feature that mitigates the temptation workers may feel to resort to high-interest payday lenders. Workers at participating businesses sign up for the service as they would for direct deposit. Once onboarded, they can request free advances on a portion of their earned income via the Clair app (or a partnering app). The advance is loaded onto a Clair debit card and the amount is deducted from the worker’s account on the subsequent payday.
According to Clair, Instant Pay Access provides a reduced reliance on payday loans and more income security in the event of emergency for workers, and turnover reduction and lower check printing costs for businesses. Upfront Ventures partner Aditi Maliwal, who sits on the Clair board of directors, praised the company’s business strategy of avoiding high customer acquisition costs by “creating a product embedded in other services that workers already use.” Simko echoed this point, highlighting not just Clair’s value to SME payroll operations, but also the value that fintechs bring to small businesses more generally.
“With small business employees making up nearly 50% of the country’s workforce, employers often don’t have enough scale to offer better benefits on their own, so they look towards their software providers,” Simko said. “By enabling these providers, we are bridging a gap and empowering them with functionalities their users want.”