Refyne: an Earned Wage Access (EWA) provider in India became a superfast success with its Salary-on-demand product
Refyne has raised a total funding of $106M over 3 rounds.
It's first funding round was on Dec 01, 2020.
It's latest funding round was a Series B round on Jan 12, 2022 for $82M.
7 investors participated in it's latest round, lead by Tiger Global Management.
Refyne claims to be working with 300+ employers having serviced 60 lakh employees
Here's a snapshot of the global funding landscape:
Global EWA market expected to reach multi-billion dollar valuations by 2030, fueled by a CAGR exceeding 20%.
Venture capital (VC) firms invested over $1.3 billion in EWA companies in 2023 alone.
Notable funding rounds: PayActiv ($500 million), CloudPay ($185 million), Wagely ($50 million), Refynance ($80 million), DailyPay ($83 million).
Regions: North America leads the charge, but Europe, Asia, and even emerging markets are seeing significant activity.
Checkout JP Morgan research report on EWA
Is this an attractive loan product?
1) Lets understand from employee perspective
81% employees face liquidity crunch between pay cycles.
Cheaper than payday loans
Usually fee based charges and 0% direct interest
Auto deduction from the next month's salary
2) From employer perspective
Increased Employee Satisfaction and Retention: Offering EWA demonstrates your commitment to employee well-being.
Reduced Absenteeism: Financial problems can contribute to employee absences.
Improved Employer Brand: Offering EWA is an attractive employee benefit and can differentiate you from competitors, making you a more desirable employer.
In a research, 60% of employees said they would consider EWA as a deciding factor for their next job.
3) From lenders perspective
Much better returns: Charging flat fee on slab based withdrawal results in average effective interest rates of > 60%
Reduced risk for borrowers: with deeper integration with payrolls of the employers, repayment via payroll deduction is possible. Which significantly reduces the risks.
4) Lets understand from investors perspective
Why the investor buzz?
Booming market and large addressable market: Millions of workers globally struggle with payday loan debt and financial instability. EWA offers a safer, more responsible alternative.
Dual benefit: EWA improves employee financial well-being and boosts employer retention and engagement.
Tech-driven innovation: EWA platforms leverage cutting-edge technology for seamless integration with payroll systems and secure transactions.
What are the operational challenges and risks to the lenders?
Employer partnership led growth - This slows down the growth speed. Deep integration with employers is needed. Negotiating contracts with each employer can consume significant time and energy
HRMS partnership led growth - this can turn out to be relatively faster way to grow. It can make your offering directly be available to all the employers on that HRMS platform
Employee absconding can turn out to be bad debt - In developing country like India, absconding rates for employees is between 5 to 10%. In such cases employers may hold certain pay for not serving the notice period
Operational data entry risks like wrong attendance marking, non-updation of exited employees, improper updation of salaries etc can also result in bad debt
Competition can lead to price-wars and diminishing margins - employers will be attracted to lenders offering incentives and better pricing, resulting lower barrier to entry and exit
How can Synoriq help in setting up EWA as a new loan product for you?
Synoriq has world class loan management system that supports EWA too. Following is offered in the Synoriq EWA offering
Product construct for EWA
Option#1: EWA similar to Credit Card offering with multiple drawdowns
Option#2:EWA as bullet loans with repayment on the salary day
Handling EWA similar to Credit Card
Sanctioned limit
Daily changing available limit based on attendance
Multiple drawdowns within available limit
Slab based fee structure
Fee computation configurations - either compute on every drawdown OR monthly fee computation on every drawdown
Daily interest accrual - Interest computation (in any) on utilised amount
Billing of dues every month / N days before the salary day
Grace period
Define interest free period similar to credit cards
Interest / Penal charge handling on payment missed
Convert to EMI functionality
Handling EWA as bullet loans under every-day changing limit at customer level
Each drawdown request is booked as a separate loan in the system with a defined repayment date
All loans are linked with the same Cust ID
Ability to define jumper rates in case of non-payment
Additional top-up loans as personal loans
HRMS handoff files and data exchange
Upload the daily limits to Synoriq LMS via file upload
API availability for limit updation via APIs
Employer-wise payroll deduction file
APIs available for employer-wise deduction information access
Disbursements
Instant disbursements through bank integrations
Fee deduction from drawdowns directly and payment of net balance amount
Loan accounting
Ability to compute Effective Interest Rates (EIR) as per IndAS