Wages, a fintech out of Indonesia, made its name with Earned Wage Access: a way for workers in Southeast Asian countries to get an advance on their salaries without resorting to high-interest loans. With half a million people now using the platform, the startup has expanded its business into a broader “financial wellness” platform, and to further push that effort, the company has now raised $23 million.
The news is particularly notable given the funding crash that startups in Indonesia have faced over the past few years, highlighting how developing countries have been hit harder than developed markets for technology. In the current bear market. Indonesia’s Financial Services Authority said in January that Indonesia’s startup funding fell 87 percent in 2023 from a year earlier, down $400 million to $3.3 billion.
This economic pressure is not exclusive to startups: ordinary people are under even more pressure.
While consumption of goods and services has increased significantly, wage growth in sectors has not kept up. Workers are looking for solutions that include loans to meet their needs between fixed pay cycles.
But access to credit is not widespread.
Millions of workers are underbanked and have no credit history. In some cases, such workers are forced to look for alternatives, which may be to find a job that pays wages in shorter intervals than the traditional monthly pay cycle. This results in high attrition rates for employers. Similarly, workers who cannot borrow money from a bank or financial institution often fall prey to loan sharks in case of emergency, who charge exorbitant interest rates and follow predatory practices. It’s no wonder that access to the living wage is held up as a financial remedy by global banking institutions such as JP Morgan: it’s important to both employers and employees.
The concept of wage access has caught on among companies in developed markets such as the US and the UK – especially after the COVID-19 pandemic hit jobs and household incomes for many. In 2022, Walmart acquired Earned Wage Access Provider to even offer early payment access to its employees. Other major U.S. companies, including Amazon, McDonald’s and Uber, also offer early wage access programs to employees.
Vejli, headquartered in Jakarta, will bring the model to Indonesia in 2020 and enter Bangladesh in 2021. The startup believes that offering access to a living wage in these markets is even more important, as 75% of Asian workers live on paycheck to paycheck and have much lower pay than they do. counterparts in the United States and other developed countries.
![with wages](https://techcrunch.com/wp-content/uploads/2024/03/wagely-app.jpg)
Image credit: with wages
“We’re partnering with companies to give their workers a way to withdraw their paychecks any day of the month,” Kevin Hausberg, Wegley’s co-founder and CEO, said in an interview.
Like other wage access providers, Wagley charges a nominal flat membership fee to employees who withdraw their salary early.
Hausburg told TechCrunch that the fee, which he describes as a “salary ATM charge,” typically ranges between $1 and $2.50, depending on the part-wage employee returns, as well as their location and On financial prosperity.
Wagley, which has about 100 employees, including about 60 in Indonesia and the remaining 40 in Bangladesh, expects to generate just over $25 million in payroll in 2023 through nearly one million transactions and serving 500,000 workers.
Since its last funding round announced in March 2022, the startup, the founders said, has seen its revenue grow about fivefold and tripled its business over the past year, without disclosing details. These revenues come only from the membership fees that startups charge to employees. Even so, it still burns cash.
“We’re burning cash because it’s a volume game,” Hosberg said. “However, the margins and the business model itself are sustainable at scale.”
While Wagely is Southeast Asia’s leading provider of paid access to startups, the region has added some new players. This means that the startup has some competition. Also, there are global companies that have the potential to take over Wajali by entering Indonesia and Bangladesh over time.
However, Hausburg said the facility makes the startup a distinct player. It takes three taps from downloading Wagely’s app or accessing its website through a browser to deposit money into your bank account, the founders said.
“It’s something that no other competitor even comes close to because other paid access companies are focusing on different things,” he said.
One of the areas where global payday access providers have turned their attention today is lending – in some cases, to lending to employees. Some platforms also include advertisements to generate revenue by offering different products that they sell to workers. However, Hausburg said the initiative didn’t start with advertising or any other services that didn’t make sense to the workers it serves.
“Focus on the needs of your customers. Don’t worry, and don’t try to improve short-term income,” he noted.
Wagely’s business model works on economies of scale. That is, to become profitable, it needs to grow from half a million people to several million.
With Capria Ventures leading this latest round, the startup plans to use the funds to go deeper into Indonesia and Bangladesh, expand into financial services, including savings and insurance, and explore AI-based use cases, including automation. Document processing and local language communication. Interfaces for workers.
Recently, Vigil partnered with Bangladesh’s commercial bank Mutual Trust Bank and Visa to launch prepaid salary cards for employees in the country, which has a smartphone penetration rate of around 40% but for card-based payments and ATMs. Extensive infrastructure. It is looking at other Asian countries but is not looking to enter any new markets anytime soon, the founder said.
Wagely did not disclose the amount of debt versus equity at this time but confirmed that it is a mix of the two. Part of the loan will be used mainly to fund salary payments. It was also the first time that a startup raised a debt of $15 million in equity before this funding round.
“Growing a business with equity alone is unsustainable, especially because we’re paying workers before they earn a salary, and the only way you can build this business sustainably is to Having a strong partner on the debt side that provides you with the capital. And now was the time,” Hausberg told TechCrunch.
Employers do not provide advance payment of wages by themselves; Instead, they refund the initial amount for the amount distributed to employees at the end of the pay cycle. This initially requires maintaining sufficient reserves to cover advance wages for employees registered on the platform. The startup carries out “rigorous checks” on employee partners and only works with publicly listed companies to reduce the risk of non-payment by employers for higher wages provided to employees after the payroll ends.
“The Vajili team has demonstrated outstanding performance with impressive growth in providing a sustainable and winning financial solution for underserved blue-collar workers and employers,” said Dave Richards, managing partner, Capria Ventures, in a prepared statement.