On-demand payment fintech, DailyPay raised $175 million from investors this week while the banking payments fintech Amount landed nearly $100 million, they said in press releases. The investments underscore how the industry has become a magnet for money.
New York-based DailyPay said in a press release yesterday that in addition to the new equity investment, it also sourced $325 million in credit capital to fuel its business that enables employers to let employees pay themselves before the end of a standard pay period. For a $2.99 flat fee, employees can receive payments from what they’ve earned, ahead of payday. The employer can also agree to cover the fee.
Payments fintechs attracted $6.03 billion worldwide from venture capital firms during the first quarter, more money than all but one other sector among 8 tracked by research firm CB Insights in its recently released first-quarter report on venture investing in financial technology startups.
That amount directed at payments fintechs was nearly double the $3.6 billion the category attracted in the first quarter last year. The number of first-quarter investments in the arena also rose over the year-ago period to 114 from 99. Those figures were higher for the payments space than in any other quarter over the past year.
Some 300 different types of companies, from the mega-grocer Kroger to Warren Buffet’s Berkshire Hathaway conglomerate to healthcare facilities company HCA Healthcare, have signed on for DailyPay’s services since it was founded in 2016.
The equity investment will fuel further expansion of that core payroll service, but also buttress DailyPay's moves into entirely new markets, DailyPay Chief Innovation Officer Jeanniey Walden said in an interview on Tuesday.
“The percentage of organizations that have implemented on-demand pay is still relatively low because it’s an emerging market,” Walden said, noting that the COVID-19 pandemic spurred acceptance of the offering as employees working from home suddenly had more retail needs.
Many companies are still unaware that the technology exists. “Absolutely a lot of this capital is going into funding increased awareness,” Walden said.
DailyPay also has big plans to “change the relationship between merchants and their shoppers, as well as financial institutions and their customers," the company said in the press release Tuesday announcing the new fundraising.
With respect to the retail realm, Walden said the company is studying ways to allow employees to more directly use their payroll money at a retail venue, without fees. “That’s where we are looking to disrupt what we consider to be an antiquated process,” she said. She declined to provide additional details.
Likewise, she said it was too early to say how DailyPay will deploy its service with respect to financial institutions and their relationships with customers.
“When we started the company, we realized that there was an issue with employees getting access to their money when they needed it,” she said. “What we learned quickly was solving that was like putting a band-aid on the problem. We realized that the entire financial system had become outdated.”
DailyPay’s ambitious goals are backed by $250 million in total equity capital, including the $175 million announced this week. That latest round was led by a new investor, Carrick Capital Partners. "We chose to invest in DailyPay now because we believe they are only just beginning to respond to the enormous opportunity they have to provide on-demand pay solutions to global enterprises,” the firm’s co-CEO Jim Madden said in the release.
Chicago-based Amount develops tools that retail banks can use to provide their clients with better digital and e-commerce services. That includes allowing merchant clients to incorporate buy now-pay later installment payment options in their point-of-sale systems, and even white labeling the POS feature with their own brand. Amount also incorporates account verification and analytics services.
Its latest fundraising round brings total capital raised to $243 million, according to a separate press release Tuesday. It has financial backing from the big investment bank Goldman Sachs, the commercial bank Barclays and venture capital firms including WestCap.
Barclays also recently began using Amount’s services, as do the banking companies HBSC, TD Bank, Banco Popular and Avant, according to the release.
Amount said it plans to use its newly raised equity capital “to accelerate hiring" in its product, technology and sales groups while pursuing merger and acquisitions to add products and features to its platform.