Earnipay raises $4 million to help Nigerian employees get faster access to their salaries – TechCrunch
To earna fintech that provides flexible, on-demand access to employees, raised $4 million in seed funding led by a start-up venture capital firm Canaan.
Participating investors include XYZ Ventures, Village Global, Musha Ventures, Voltron Capital, Ventures Platform and Paystack CEO Shola Akinlade.
Earnipay, which has been in beta since September 2021 and only launched last month, plans to roll out its pay-on-demand solution to 200,000 employees by the end of 2022.
Most of Africa’s labor force is paid monthly paycheck but direct to paycheck. younlike more developed countries like the United States, where every week or bi-weekly salaries can support this lifestyle, low monthly salaries – which are the norm in Africa – cannot. So what ends up happening is that wage earners take payday advances or borrow money from payday lenders and loan sharks to offset their day-to-day expenses and emergencies, ultimately fall into a cycle of debt.
A few individual companies have sought to solve this problem internally and allow employees to access their daily pay while they work there. Earnipay founder and CEO Nonso Onwuzulike tried this while running Reaval, a Ghana-based recycling business he launched alongside in 2019.
Its employees were informal sector waste collectors, with a history of collecting daily or weekly payments. On the other handOnwuzulike, who had worked most of his life in the formal sector — even serving as Bolt Ghana’s country manager during that time — was used to to pay and receive monthly salaries, which caused problems for his recycling business.
“That long waiting time between payroll cycles took its toll, especially for those people who weren’t earning a lot of income,” the founder said describing his former company’s pay situation. “They ended up not being productive because they had money issues and that led to attrition and retention issues for me because they were guys who are used to get paid immediately, but I was paying them once a month, and it didn’t make sense to them. »
Onwuzulike has developed a solution to make their payment flexible: weekly or bi-weekly. He then thought he could extend it to formal sector businesses and tthere was data to support this decision. According to a survey of a few employees who worked in the formal sector, about 80% of them preferred to have flexible access to their salaries rather than the option of salary advances. popularly launched by the banks. This is how Earnipay was born, with Busayo Oyetunji and Joshua Ajayi as COO and CTO, respectively.
Earnipay builds this is known globally as earned salary access platform. But Onwuzulike describes the company as a financial wellness solution for employees, the first product of which is access to on-demand pay.
The platform integrates with companies’ existing payroll or human resource management systems to offer its services to employees, who can then track and withdraw their accrued salaries through the app.
Employee salaries are on a pro rata basis daily and companies can set limits on the percentage of salary that employees can withdraw each month. For example, if an employee earns ₦300,000 per month, they can earn ₦10,000 per day (for 30 days) or ₦15,000 (if the employer configures the system to only count working days; 20 in this case).
The founder said Earnipay makes these payments on behalf of the business, especially those whose cash flow can be affected should they fund the payment of earned wages themselves. At the end of each month, these companies reimburse Earnipay. But for those who can afford it, Earnipay creates a reconciliation account in addition to employee salary accounts with scheduled automatic repayments.
Earnipay’s revenue comes from charging fees to employees for early access to a portion of their salary. For withdrawals between ₦2,000 ($4) and ₦10,000 ($20), Earnipay collects a fee of ₦250 ($0.5). For withdrawals of ₦10,000 to ₦50,000 ($100), the fee increases to ₦500 ($1).
Since running in beta, Earnipay has served over 20 corporates, outsourcing companies and HR solution providers in Nigeria. Some of its customers include Eden Life and Thrive Agric, whose “thousands of employees” have used the app to access their pay more than 1,000 times, the company said.
“We are very optimistic about the product we were building. Our goal is financial well-being for all and we want to create products accordingly. We have taken the first step, which is affordable access,” Onwuzulike said, highlighting other products his company has in the works.
“The second product we are creating is Financial Education to provide people with financial literacy tools to make better spending decisions. We will build products around it principally fair so that we enable employers to make their employees happier, improve productivity, keep talent and solving the biggest problem in the workplace today that no one is solving, which is employee money issues.
Earnipay will use this seed funding to target large companies and focus on the region. It could face competition from South African startup FloatPays, backed by YC, which plans to expand across the continent.
That said, the experience of Earnipay investors in backing identical businesses in emerging markets will be critical to the growth of Nigerian fintech. XYZ Capital is an investor in Refyne, a two-year-old Indian salary access platform that recently raised $82m in Series B. The San Francisco-based venture capital firm is also backing Mexican company Minu alongside Village Global.
For Canaan, this appears to be its first investment in an earned wage access platform, judging by its portfolio.. Earnipay presents an opportunity for the Connecticut-based fund to participate in an up-and-coming fintech category that is seeing increased adoption in emerging markets.
“We have seen access to earned wages increase quickly in many markets and I think it’s a natural choice in Africa,” Brendan Dickinson, general partner of Canaan, said in a statement. “Earnipay has quickly imposed itself with a product built More precisely for this region’s payroll behaviors, and early adoption by employers is very strong. Nonso have built one of the strongest teams we have come across across the continent, and we are delighted to have the opportunity to partner with them..”