It was a short week and that was reflected in the amount of news we covered in fintech land last week. But there was still plenty to talk about, including Clair’s raise, some allegations against Deel and exclusive post-SVB growth numbers shared by banking services startup Mercury.
On-demand pay gets a boost
Some 82% of people are considered frontline workers who work on shifts and are likely paid hourly. The global pandemic shed a light on these workers when their fatigue and burnout resulted in “The Great Resignation” of hundreds of thousands of workers who left their jobs after feeling disrespected by employers and customers, as well as feeling they weren’t making enough money, according to a Pew Research study.
This ignited the tech sector — and subsequently the venture capital market — to build modern solutions to help employers give their employees the best experience possible and improve retention.
Much of the early solutions focused on productivity and communication — consider Flip, Blink, AskNicely, Salt Labs and Snapshift. More recently, we’ve seen startups attracting some solid VC funding for on-demand pay offerings for workers: Rain, DailyPay and Minu to name a few.
The latest is Clair, which raised $25 million in equity funding for its approach to helping workers get paid after completing a shift. The company also announced $150 million as part of a new consumer lending program from partner bank Pathward, which holds the FDIC-insured accounts for Clair and provides the wage advances to frontline workers.
What makes Clair more compelling than its competitors, explains co-founder and CEO Nico Simko, is that rather than take on the wage advance risk itself, Pathward does that.
“We’re the first provider that went to a bank and convinced the bank to do those advances, basically as micro loans, $50 loans,” Simko said. “Most early-stage, on-demand pay companies are the ones advancing the funds. By convincing a bank to do this, it gives regulatory certainty to our partners and consumers because there is a national bank backing it.”
Clair is already working with 10,000 employers; however, the U.S. Chamber of Commerce recently reported that industries, including healthcare, accommodation and food, continue to have a high number of job openings, so we’re likely to see the need for employee benefits like these also grow. — Christine.
Maza Update
On June 28, I wrote about Maza, a fintech company claiming to help undocumented
immigrants gain access to the U.S. financial system by providing them with an
individual tax identification number (ITIN) and banking services. A few days
after that article went live, fellow fintech enthusiast Jason Mikula published
a newsletter challenging
some of Maza’s claims. We reached out to a couple of immigrant-focused
organizations but unfortunately did not hear back. But we did hear
back from Maza regarding Mikula’s allegations. Here is what Maza co-founder and
CEO Luciano Arango wrote via email:
We
apologize that our website included some unclear and outdated language, all of
which has been corrected. In fact, our bank previously notified us of this, but
unfortunately we did not make the changes immediately due to an internal Maza
communications issue. All of the updates have now been made, and we have since
put in place new procedures to ensure oversights like this do not happen again.
In
addition, he added that Maza updated its website and app for further clarity
around eligibility and compliance:
·
Eligibility: Maza’s
services have always been available to all U.S. residents who can provide
proper documentation verifying their identity. We’ve updated our terms,
disclosures to make that clearer. We have always sought to provide a wealth of information to
our customers regarding the purpose of an ITIN, including all the benefits and
limitations of obtaining one.
·
Compliance: The
uses of certain logos and language in Maza’s marketing materials have since
been updated as well. Maza customers’ deposits are held by our banking partner,
Blue Ridge Bank, N.A. to be eligible for FDIC insurance, and the individual tax
ID numbers (ITINs) we provide to customers are issued by an IRS certified acceptance
agent.
Arango
also said he wanted to address a few topics raised in Mikula’s newsletter,
which Maza viewed as “incorrect or incomplete”:
·
BaaS:
As I stated during the interview, Maza is not a bank, which was accurately
portrayed.
·
Expiring ITINS: The newsletter stated that Maza does not make
it clear that users’ ITINs will expire if they do not use them to file tax
returns. This is not accurate. Maza does make customers aware of when their
ITIN is expiring.
·
Monthly Charges: The newsletter stated that Maza charges a
monthly fee, which is incorrect. The information referenced in the newsletter
was part of an early test of alternative revenue models that were never put
into practice, and no customers were ever charged for Maza’s services in this
way.
To
be clear, Maza said that it offers the banking portion (checking account, debit
card) of its services for free with no monthly charge. There is a separate
service for ITINs, where Maza charges $150 a year to help obtain the ITIN and
then renew. Arango emphasized that “[o]ne can be a banking customer their whole
lives and *never* decide to get an ITIN. He/she, in that case, will *never* pay
a $150 annual fee. Conversely, one can register for Maza’s ITIN service and
have no interest in the banking component. He/she would pay the $150 annual fee
and engage with the free banking product if they like (just like a non-ITIN
user).”
The
company also claimed that it does not market specifically to customers based on
their documentation status, noting that “all U.S. residents are eligible to
apply, including those that need an ITIN because they cannot obtain a SSN.” —
Mary Ann
Weekly News
As
reported by Mary Ann: “Last week, Senator Steve Padilla (D-San Diego) sent a
letter to Stewart Knox, California Secretary of Labor, alleging that
fintech-turned HR decacorn Deel has hired hundreds of
employees but classified them as independent contractors. By doing so, Senator
Padilla charged, Deel is “effectively denying them the full suite of employment
and social safety net benefits and labor protections they are entitled to,
including healthcare, retirement, unemployment insurance, worker’s
compensation, collective bargaining, and overtime pay.” Further, Senator
Padilla claimed that Deel “appears” to be advising its own customers (which
include the likes of Nike, Subway, Reebok, Forever 21 and Klarna) “to
misclassify their own employees and evade taxes in California,” as well as
avoid paying employee benefits. Deel denied the allegations, saying they were
“completely made up and regurgitated from old news, most likely based on
competitor hearsay.” Knox responded that his office would look into the
information that Padilla provided and “follow up” with their findings.
As
reported by Rita Liao: “The regulatory crackdown that has shaken up China’s
fintech industry since late 2020 appears to be coming to a close with the
imposition of hefty fines on the country’s two digital payments giants: Tencent and Alibaba.”
Mary
Ann interviewed Mercury CEO and co-founder Immad Akhund about
the fintech company’s recent surge in customers (he shared new customer growth
figures exclusively) following the collapse of SVB. You can also hear more
about that growth as well as Immad’s advice on how startups can avoid “falling
into a startup death spiral” in the podcast below. Did you know that Immad has
backed over 300 startups, including Airtable, Rappi, Substack, Deel and
Jasper.AI, as an angel investor?? We didn’t either!
