Earned-wage access (EWA) service provider Paywatch has raised US$30 million (approximately RM141 million) in funding from a mix of equity and credit facilities.
Specifically, the startup received over US$14 million (about RM65 million) in Series A equity investment, led by Third Prime and a consortium of US investors, including Vanderbilt University and University of Illinois Foundation.
The round also saw participation from new investors Octagon Venture Partners and Wooshin Venture Investment Corp.
Meanwhile, US$16 million (around RM75 million) was obtained in credit facilities from global banks, including Citi and other major banks, to fund its product expansion.
According to a press release, this is the largest funding round closed by an EWA player in Southeast Asia.
Co-founder Alex Kim shared with Vulcan Post that the funds will be used to hire new staff, invest further in engineering initiatives, and fund the expansion to new markets.
Specifically, the startup is exploring further market expansion in Southeast Asia in the medium term.
Fostering financial inclusion
In short, what Paywatch does is offer a debt-free EWA solution. If EWA doesn’t sound familiar, it can also be understood as on-demand pay.
Essentially, it’s an innovative employee benefit that allows workers to instantly access a part of their accumulated salary in real-time as it is earned, and before the end of their payroll cycle.
The objective is to help decrease employees’ dependence on loans while alleviating household debt and enhancing financial management. It also helps boost companies’ employee retention and productivity.
Paywatch is registered in Singapore, but is operationally headquartered in Kuala Lumpur. Aside from Malaysia, it’s also active in the Philippines, Indonesia, and South Korea.
Alex Kim shared with Vulcan Post that the company chose Malaysia as its base due to its partnerships and collaborations with local brands and institutions.
Specifically, they’ve worked with established local entities such as Lotus’s, Jaya Grocer, and QSR Brands such as KFC and Pizza Hut, among others.
He also believes that the quality of talent in Malaysia is unparalleled in the technology space. “It has been transformative to have Malaysians in our top C-level roles (including CTO, Head of Products, CSO and more),” Kim said.
Founded by brothers Richard and Alex Kim, the company has processed over US$58 million (RM273 million) in salaries through its system to date. Its disbursements are nearly US$8 million (RM37 million) per month.
This makes Paywatch the largest EWA service in Asia by volume of transactions.
The company expects to reach well over US$120 million (more than RM518 million) in salaries disbursed by the end of the year, more than doubling its lifetime volume.
An impressive cast of investors
Paywatch’s leading investor for this funding round is Third Prime, a US-based early-stage venture capital firm that invests in leading financial and industrial technology businesses globally.
“We have seen EWA become a mainstream employee benefit in the US and Latin America,” Michael Kim, General Partner of Third Prime, said. “And when we look to Asia, we see Paywatch becoming the leading change agent in the region with enormous momentum.”
Vanderbilt University and University of Illinois Foundation have also directly invested in Paywatch.
According to the press release, this is first time these US-based University endowment funds have invested directly in an Asia-based tech startup.
“Vanderbilt and University of Illinois Foundation (UIF) are some of the largest US endowment funds that manage billions in funds,” Alex pointed out.
The co-founder elaborated, “We are extremely honoured to have Vanderbilt and UIF as investors as they typically only invest as LP investors of VC funds (Vanderbilt has invested over US$1 billion in Sequoia alone) and are prolific investors of funds globally, including in Southeast Asia.”
Alex believes that Vanderbilt and UIF decided to invest in Paywatch as they believe in and support their ESG mission and impact-oriented approach.
“We have been advocating for financial inclusion for many years and believe that Paywatch’s earned wage access technology can push the movement forward in a meaningful way,” affirmed Travis Shore, Chief Investment Officer of the University of Illinois Foundation.
He continued, “Beyond the technology, we also believe in the company’s dedication and commitment to delivering true impact in Southeast Asia.”
Accessibility at the forefront
Besides Paywatch, there are a few other EWA startups in the region. A homegrown one is Payd.
Alex believes that what sets Paywatch apart from other providers is simply their debt-free EWA solution that has been proven to work.
“At the end of the day, as a B2B solution, the HR department of companies decide whether to provide our service or not,” he said.
Alex believes EWA services must be provided at a nominal fee at most, as they are simply providing access to salaries that have already been earned and accumulated by the users.
“Therefore, we have decided to only charge a flat, nominal fee of 50 cents per transaction throughout all our markets (RM2 in Malaysia, with no other fees involved) or for free when used to pay for bills through our bill pay solution,” he explained.
With that mission and mindset, Paywatch is able to support the Malaysian government’s efforts to reduce income disparity and promote financial resilience.
The press release also points out that Paywatch’s commitment to financial inclusion dovetails with the Malaysia Digital Economy Blueprint. This aims to transform Malaysia into a digitally-driven, high-income nation, as well as a regional leader in the digital economy
The recent funding will enable Paywatch to further integrate its services with Malaysia’s robust digital infrastructure, contributing to our nation’s socioeconomic development.
Featured Image Credi: Paywatch