The financing saw participation from existing investors, including QED Investors, partners of DST Global, Jigsaw VC, XYZ Capital, and RTP Global. Digital Horizon is a new investor which has come on board, the company said.
Earned Wage Access (EWA), also known as on-demand pay, enables employees to access a portion of their accumulated wages, ahead of their payday, with the remaining being paid on the regular salary day. For example, an employee earning Rs 30,000 a month can access Rs 10,000 in the middle of the month for an unforeseen expense and get the remaining salary at the end of the month.
The startup looks to use the fresh capital for scaling, expanding into different geographies, developing more products, spreading awareness about the product, and hiring more people to add to its current 85 employees, said Chitresh Sharma, cofounder and chief executive of Refyne.
Sharma, however, did not disclose the valuation post the funding but did say that it has jumped 6.5x from its
Series A funding of $16 million in July.
Business model
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Refyne, founded by Sharma and Apoorv Kumar, operates in a business to business to consumer (B2B2C) model and has partnered with 150 organisations, which includes Practo, TeamLease, Cars24, Cafe Coffee Day, and others to give their employees an option to access their salaries before payday. While it has tied up with non-banking financial companies (NBFCs) for capital, Sharma said that Refyne has applied for an NBFC license.
The company said that over 700,000 employees can use its service and it expects to reach more than 3 million employees in 12 months. While in hindsight Refyne looks like a lending company, Sharma says that is far from it. He is in fact aiming to disrupt many of the lending firms.
“There is no risk of default,” Sharma said. “The risk is shifted to the employer but it is not really a risk because people have delivered the value.”
What’s in it for employees?
Every time the employee draws a salary, a fee would be deducted. The charge could be as low as Rs 9, said Sharma. The NBFC partner takes a cut from this fee as the cost of capital. The Refyne app gives employees visibility into their real-time wages. It allows them to track, spend and save their earned pay any time before payday, hence doubling up as a personal finance app.
“Income happens once, expense happens every day. We are trying to calibrate that and help people avoid debt traps,” said Sharma.
Online lending has skyrocketed over the past few years and business models like buy-now-pay-later (BNPL) has emerged as a popular way for customers to avail themselves credit. Management consulting firm RedSeer estimates India’s BNPL market will grow to $45-50 billion by 2026 from $3-3.5 billion currently.
Sharma said that BNPL is not even competition and that EWA is an entirely different category. Companies like Paytm, Simpl and LazyPay provide credit to users to pay at select merchants with whom these companies have partnerships.
“BNPL is accessible for a prime group of customers,” said Sharma, referring to the high-income users BNPL companies target. “Majority of the market is subprime. You are dependent on the merchants that accept BNPL. EWA does not discriminate. Whether you are a c-suite level guy or a factory worker. You can access it in 60 seconds and you can use it anywhere,” he added.
Why would employers want to partner?
Sharma said that the businesses which have enabled EWA for their employees have seen retention rates (of employees) go up significantly. He said that in just six months of launch his clients are seeing retention go up by 37%, helping them hire by 2.7 times faster.
“I am bound to be erratic or irregular at work if my financial situation is vulnerable with creditors looming over,” said Sharma. “Your financial psyche connects to your general well being. Giving people the right to use their salary on-demand solves a major chunk of people’s problems.”
A report prepared by accounting firm Ernst & Young in partnership with Refyne found that 81% of employees face liquidity crunch between pay cycles. It found that close to 60% of employees said they would consider EWA as a deciding factor for their next job.
The report also noted employers who implemented EWA observed a significant drop in attrition, faster talent acquisition, enhanced workforce productivity, and improved eNPS. Net Promoter Score is an index to measure customer happiness.
“We believe Refyne will be the preferred partner for large employers that want to offer Earned Wage Access,” said Alex Cook, partner, Tiger Global. “We are excited to support Chitresh, Apoorv and the Refyne team, as they work to improve financial wellness for the Indian workforce.”
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