Wagely, an Indonesian fintech company, has made a name for itself with its access to earned wages, a way for workers in Southeast Asian countries to get salary advances without resorting to high-interest loans. The startup, which currently has 500,000 users on its platform, is expanding its business into a broader “financial wellness” platform, and the company has now raised $23 million to further boost its efforts. Masu.
This news is particularly noteworthy given the funding crunch that Indonesian startups have faced over the past few years, and shows that developing countries have been hit even harder than developed markets in the current technology bear market. It's highlighted. Indonesia's Financial Services Authority announced in January that startup funding in Indonesia in 2023 was down 87% year-on-year, falling from $3.3 billion to $400 million.
These economic pressures are not limited to startups; ordinary people are under even greater pressure.
While consumption of goods and services has increased significantly, salary growth across sectors has not kept pace. Workers are looking for solutions such as credits to meet their needs during fixed pay cycles.
However, access to credit is not universal.
Millions of workers are unbanked and have no credit history. In some cases, such workers are forced to find alternatives, such as finding jobs that pay at shorter intervals than the traditional monthly pay cycle. As a result, employer turnover is high. Similarly, workers who are unable to borrow money from banks and financial institutions in emergencies often fall into the trap of loan sharks who charge exorbitant interest rates and follow predatory practices. It's no surprise that global banking institutions like JPMorgan champion access to earned wages as a financial panacea. This is important for both employees and employers.
The concept of access to earned wages has become popular among businesses in developed markets such as the US and UK, especially since the COVID-19 pandemic affected many individuals' jobs and household incomes. In 2022, Walmart acquired earned wage access provider Even to provide early pay access to employees. Other large U.S. companies, including Amazon, McDonald's and Uber, also offer early wage access programs to their employees.
Headquartered in Jakarta, Wagely introduced its model to Indonesia in 2020 and expanded to Bangladesh in 2021. 75% of workers in Asia live paycheck to paycheck, making it even more important for the startup to provide access to earned wages in these markets, with salaries significantly lower than theirs. I believe. It also supports the United States and other developed countries.
Image credit: Wagely
“We partner with companies to give their employees a way to withdraw their paycheck at any time each month,” Wagely co-founder and CEO Kevin Hausberg said in an interview. .
Like other earned wage access providers, Wagely charges a nominal flat membership fee to employees who withdraw their paychecks early.
Hausberg told TechCrunch that the fee, which he describes as a “payroll ATM fee,” is typically a $1 fee, depending on a portion of the employee's wages withdrew and their location and financial situation. It will cost between $2.50 and $2.50.
Wagely has approximately 100 employees, approximately 60 in Indonesia and the remaining 40 in Bangladesh, and serves 500,000 employees with a payroll of more than $25 million through nearly 1 million transactions. I am.
Since the last funding round announced in March 2022, the startup has grown its revenue nearly five times and tripled its business compared to last year, the founders said, without providing further details. These revenues come solely from the membership fees that the startup charges its employees. Nevertheless, it still burns cash.
“We're wasting cash because this is a volume game,” Hausberg said. “But the profits and the business model itself are sustainable at scale.”
Wagely has been Southeast Asia's early-earning wage access provider, but there are several new players joining the region. This means this startup has some competition. There are also global companies that have the potential to compete with Wagely by expanding into Indonesia and Bangladesh over time.
But Hausberg said that convenience is what makes the startup a standout player. It takes three taps to download Wagely's app or visit the website via your browser and deposit money into your bank account, the founders said.
“This is something that other competitors don't have because other wage access companies are focused on other things,” he said.
One area where the world's earned wage access providers are now shifting their focus is lending, and in some cases lending money to employers. Some platforms also include advertising that generates revenue by offering workers a variety of products to cross-sell. But Hausberg said the startup doesn't do advertising or other services that aren't meaningful to the workers it serves.
“Focus on what your customers need. Don't get distracted. And don't try to optimize for short-term revenue,” he pointed out.
Wagely's business model operates on economies of scale. In other words, to make a profit, you need to scale from 500,000 people to millions.
Capria Ventures led this latest round, and the startup will use the funding to further expand into Indonesia and Bangladesh, expand into financial services including savings and insurance, and develop generative AI such as automated document processing and local language conversations. We plan to explore base use cases. Interface for workers.
Recently, Wagely partnered with Bangladeshi commercial banks Mutual Trust Bank and Visa to launch prepaid payroll cards for employees in the country. The country has a smartphone penetration rate of around 40%, but has a huge infrastructure for card-based payments and ATMs. The company is eyeing other Asian countries, but has no plans to enter new markets anytime soon, the founder said.
Wagely did not disclose the amount of debt and equity in this round, but acknowledged it is a mix of the two. The debt portion will be used specifically to fund payroll payments. It was also the first time the startup had raised debt, having received approximately $15 million in total equity prior to this funding round.
“Growing a business on equity alone is unsustainable. Especially since we pay our employees upfront with the salaries they earn, the only way we can sustainably build this business is if we are very debt-heavy. It was about getting a strong partner and capital. And now was the time,” Hausberg told TechCrunch.
Employers do not advance wages in the case of earned wage access and only repay the amount paid by the startup to the employee at the end of the payroll cycle. Therefore, startups must have enough money available to pay advance wages to employees who register on the platform. It also carries out “rigorous checks” on employer partners and only works with listed companies to avoid situations where employers fail to repay startups after the end of the pay cycle.
“The Wagely team has demonstrated impressive growth and execution excellence in providing sustainable, win-win financial solutions to underserved blue-collar workers and employers.” said Dave Richards, managing partner at Capria Ventures, in a prepared statement.