Social-impact FinTech Clair raises $4.5mn to disrupt the payday lending industry

By Pavithra R

New York-based Clair, a social FinTech that provides Instant Pay Access as a Service for human capital management (HCM) and gig platforms to allow workers to get paid faster has announced that the company secured $4.5 mn seed round led by Upfront Ventures, with participation from Founder Collective and Walkabout Ventures. 

The funding round also saw participation from former Venmo COO Michael Vaughan and Seamless Founder Paul Appelbaum.

The pandemic has resulted in an unprecedented surge in unemployment with nearly 40% of Americans struggling to cover unexpected $250 expense. In times of emergency, they often need to take out high-interest payday loans and gets entrapped in debt cycles. In response, several payroll providers and time and attendance providers announced instant payment features to enable workers to get paid daily. Clair believes that these changes are the early signs of a coming wave that will significantly shorten the standard two-week pay cycle.

“We are thrilled to be one of the only sources of free capital for America’s hourly and gig workers. 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,” said Nico Simko, Clair’s Co-Founder and CEO. 

Clair embeds its financial services within payroll, workforce management, and gig platforms. By offering instant payments services to gig platforms in addition to traditional workforce management systems, the company hopes to help them win and retain new freelancers. The FinTech generates revenue via debit card interchange fees paid by the merchant where these cards are accepted.

“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. By enabling these providers, we are bridging a gap and empowering them with functionalities their users want,” added Simko.

Clair offers workforce management software providers various turnkey products as well as APIs, which allows them to set up instant payments and offer the company’s financial services products to their clients in a matter of days.

“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. 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,” said Aditi Maliwal, a partner at Upfront Ventures who now sits on Clair’s board.