Earnipay, a Nigerian fintech startup that launched publicly last month has raised $4 million in a seed funding round led by early-stage venture capital Canaan. The round saw the participation of XYZ Ventures, Village Global, Musha Ventures, Voltron Capital, Ventures Platform and Shola Akinlade – CEO of Paystack.
Earnipay provides flexible and on-demand salary access to workers. Although it only launched last month, the startup has been around since September last year operating in beta mode.
The plan, for Earnipay is to offer its on-demand solution to at least 200,000 employees by the year’s end. The problem that Earnipay is looking to solve is stopping workers (especially low-income earners) from falling into a debt cycle as a result of taking loans before their payday. Unlike developed countries where workers can opt for weekly or bi-weekly wages, workers in Africa mostly have to wait till the end of the month before they can get access to their pay. Many of them take to loans (usually of high interests) to solve their issues pending the time they get paid. This has plunged many people into a debt cycle; many pay off these loans only to take another and so it continues.
Earnipay’s founder and CEO Nonso Onwuzulike noticed this while he was running his side business Reaval, a recycling business based in Ghana. He created an option that let workers get access to their salaries before the end of the month. His employers were mostly people who had been in the informal sector all their lives and were used to receiving weekly payments. Nonso Onwuzulike, on the other hand, had been in the informal sector for most of his life and was used to monthly payments of salaries which he applied in his recycling business. This created a problem in the business and he had to find an equilibrium that would be convenient for workers and help push his business forward.
According to the CEO, “There were adverse effects of that long wait time between pay cycles, especially for these people who didn’t earn a lot of income. They ended up not being productive because they had money issues and it led to attrition and retention problems for me because these were guys who are used to getting paid immediately, but I was paying them once a month, and it didn’t make sense to them”.
He thought of a solution to bring “peace” to this conflict. He decided on flexible payment plans that could be on a weekly or fortnightly basis. With time, he thought that he could sell the idea to companies and businesses in the formal sector known mostly for paying workers every month. According to a survey that was carried out, most workers (about 80 percent) preferred having flexible access to their pay rather than seeking out a salary advance option that leave them in debt.
This was how Earnipay came about! Today, the startup is building an earned wage access platform that gives salary earners flexible access to their salaries. Basically, Earnipay integrates with the existing payroll or human resource management systems to offer employees access to their salaries. This system allows employees to track and withdraw their salaries using Earnipay’s platform. As described by the platform’s CEO, Earnipay is a financial wellness solution for employees.
The salaries of employees are divided proportionally on a daily basis and companies can decide to include a limit to how much of their salaries that employees can get access to before the end of the month. The startup pays these workers the amount they require and at the end of the month get reimbursed by these companies. Workers can also choose to link their salary account with Earnipay’s system and schedule automatic reimbursement to the startup.
How does Earnipay then make money? The startup charges a commission from employees who decide to access their pay before the end of the month. For withdrawals between ₦2,000 and ₦10,000, a charge of ₦250 is incurred while for withdrawals between ₦10,000 to ₦50,000, a charge of ₦500 is incurred.
Earnipay’s CEO says he is positive about the product and that it wants to bring financial wellness for all while speaking about the other products that it plans to make financial wellness a norm for workers. “We are super bullish on the product that we were building. Our goal is financial wellness for all and we want to build products in line with that. We’ve taken the first step, which is affordable access. The second product that we’re building is financial education to provide people with financial literacy tools so they make better spending decisions. We will build products around that primarily just so that we’ll enable employers to make their employees happier, improve productivity, retain talent and solve the biggest problem in the workplace today that nobody is solving, which is employee money issues”, he said.
Speaking on Earnipay and the funding round, Brendan Dickson, general partner at lead investor Canaan said that “We’ve seen earned wage access grow rapidly in many markets and believe it’s a natural fit in Africa. Earnipay has quickly established itself with a product built specifically for the payroll behaviours of this region, and early employer uptake is very strong. Nonso has built one of the strongest teams that we’ve met on the entire continent, and we’re thrilled for the opportunity to partner with them”.
Earnipay says it has served more than 20 businesses and that the platform has been used by workers from its clients such as Eden Life and Thrive Agric, more than 1,000 times.
The startup plans to use the fund acquired from the funding round to expand regionally.