Clair raises $4.5m seed round to disrupt the payday lending industry
Clair, an early stage fintech startup based in New York City, wants America’s 82 million hourly workers and 57 million gig workers to get paid as quickly as Uber pays their drivers today: instantly. Today, Clair announced a $4.5 million seed round led by Upfront Ventures, with participation from Founder Collective and Walkabout Ventures. Former Venmo COO Michael Vaughan and Seamless Founder Paul Appelbaum also participated in the round.
With the surge in unemployment brought about by the pandemic, nearly 40% of Americans said they would struggle to cover an unexpected $250 expense. In the face of an emergency, they often need to take out high-interest payday loans that trap them in a debt cycle. In response, several payroll providers and time and attendance providers announced instant payment features that would give workers the option to get paid daily. Clair is betting that these are the early signs of a coming wave that will significantly shorten the standard two-week pay cycle.
Moreover, by offering instant payment services to up and coming gig platforms in addition to traditional workforce management systems, Clair hopes to help them win over and retain new freelancers. A 2019 report showed that 65% of skilled gig workers would consider switching to a platform that paid faster, while 85% said they would work more often if they were paid faster.
Free capital and digital bank accounts for hourly workers
“We are thrilled to be one of the only sources of free capital for America’s hourly and gig workers” says Nico Simko, Clair’s Co-Founder and CEO. “We believe that everybody should be able to freely access money they’ve already earned. There are more payday lenders than McDonald’s in the US that charge on average more than 300% annual interest on loans. So we have one simple vision: it’s time for change.” Simko spent several years with JP Morgan’s Wholesale Payments team after graduating from Harvard with an economics degree.
Clair embeds its financial services within workforce management, payroll and gig platforms. Workers who choose Clair as their direct deposit account are able to get free advances on a portion of their earned wages, which they can access using their Clair debit card. Advances are then deducted from their account during the next payday. Clair generates revenue via debit card interchange fees paid by the merchant where these cards are accepted.
“We are excited to back a social-impact driven FinTech with a sound business model. Many fintechs that we’ve seen often struggle with profitability because their customer acquisition costs are so high,” says Aditi Maliwal, a partner at Upfront Ventures who now sits on Clair’s board. “We think Clair’s strategy of creating a product embedded in other services that workers already use today is one that will set them apart in the long run”.
Expanding instant pay access to small businesses
Clair offers workforce management software providers a set of turnkey products as well as APIs, which allows them to set up instant payments and offer Clair’s financial services products to their clients in a matter of days.
“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”, says Simko. “By enabling these providers, we are bridging a gap and empowering them with functionalities their users want”.
Full financial freedom, not just pay advances
Beyond wage advances and banking, Clair also wants to be a financial partner for their users. Today, Clair users are also able to set automatic reminders to put money aside, but the company has several more savings features in their pipeline.
“For us, success means that after a few years of using Clair, our users no longer need to request wage advances because we’ve helped them get out of living paycheck-to-paycheck,” says Simko.