The world seems to be moving faster every year, and yet nothing feels slower than the speed at which paychecks are distributed. In the United States, the day following a pay period, work takes two weeks to process, with a check or direct deposit a week or two later. For the tens of millions of employees who live from paycheck to paycheck, that several weeks delay can mean the difference between making a rental check – or not.
A multitude of startups have approached this problem with different solutions, and one of the newest and most compelling offerings is Clair.
With its own capital base in New York City Clair offers employees immediate – and above all – free wage payments through integration into existing HR technology platforms. It works with full-time employees as well as gig workers and has a range of online and mobile apps for workers to understand their finances and get a deserved wage advance.
The company was founded at the end of 2019 by CEO Nico Simko, COO Alex Kostecki and CPO Erich Nussbaumer directors. Just months ago, Clair announced a $ 4.5 million seed round led by Upfront Ventures, bringing total funding to $ 19.5 million.
“Advance payment” or “advance wage earned” (there is a slight difference) was Silicon Valley’s euphemism for payday loans, an industry plagued by fraud, fraud, and predatory greed that have roused workers from their hardship-earned paychecks through Usury.
Clair is characterized by the fact that the offer is free for employees. Because it’s directly linked to HR systems, the startup takes significantly fewer financial risks than traditional payday lenders, who don’t have access to the salary data that Clair can analyze.
For Simko, one of his goals is simply the complete abolition of traditional industry. “I have a payday lender right outside my Brooklyn apartment and there’s a long line on the 25th of every month and I’m not going to stop until that line goes away,” he said. “For us, success is becoming the winner in access to earned wages.”
He is Argentinian and Swiss and came to the USA to visit Harvard, where he met Nussbaumer. Finally, he worked at JP Morgan with a focus on the payments market. He kept in touch with Kostecki, their families are good friends, and the trio decided to tackle this issue, inspired in part by Uber’s instant pay feature, which was launched in 2016 and proved hugely successful.
Instead of earning money with interest, fees or tips, Clair wants to be the bank and financial service provider of choice for employees. As I noticed last week through Pinwheel, a payroll API platform, having a direct deposit relationship with a worker almost has the guarantee that they will be handling most of their financial transactions through that particular bank account.
Clair offers free instant payment advances as access 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 wages and then automatically enroll them in a digital bank.
In fact, he and the company believe in this model so much that it pays off as an incentive to integrate human capital technology platforms like workforce management and payroll systems. It provides a recurring source of income for HR tools based on the number of users joining Clair, regardless of how much those employees use the software. We are “really going down the thesis of embedded fintech,” said Simko. “Employees are starting to spend money on their Clair card and we are distributing that to ours [HR tech] Partner.”
Clair joins a number of other companies in this space, which is getting hotter as the investor-perceived opportunities in financial services remain large. Last year, payroll platform Gusto announced it was expanding from just a payroll to a financial wellness platform based in part on its instant earned wage advances, or what it calls cashout. We’ve covered Even, one of the originals in the field, with a large partnership with Walmart, as well as Neobank Dave, which offers prepaid functionality with a tip-earning model. Dave only announced VPC Impact Acquisition Holdings III, a $ 4 billion SPAC.
Nonetheless, Clair’s point of view is different, as the race for everyone around the world is intensifying with new financial services. Simko sees a gigantic opportunity to be the “Alipay” of the United States and points out that, unlike China with Alipay, Nubank in Brazil and increasingly Latin America as well as N26 and Revolut in Europe, there is still an opportunity for a comprehensive neobank take over the US market.
With the new funding, the company will continue to expand its product offering and explore areas such as healthcare and debt settlement. “I can’t give the APR based on your creditworthiness, but rather on your employer’s creditworthiness, which is the multibillion-dollar idea here,” Simko said. The team is nominally based in New York, with roughly half of the roughly 25-strong team.