5 FinTechs looking to disrupt payroll

The global financial services market is vast and growing steadily – it is predicted to reach $22.5 trillion by 2021 and grow to $28.5 billion by 2025.

A small, but growing, segment of financial services is FinTech. In 2018, FinTech companies were worth more than $127 billion, and this is expected to increase by 25% year on year and reach $309 billion by 2022.

According to KPMG’s ‘Pulse of Fintech’ report, last year was not a particularly good year for FinTech deal-making. However, deal count and activity both rebounded after a slow start to 2020 – particularly in the venture capital space.

In 2020 global FinTech investment reached $105.3bn across 2,861 deals. Global VC investment totaled $42.3bn, which was the second-highest total after 2018’s $53.8bn.

Let’s take a look at some FinTech startups disrupting the payroll space.

Tide

Small and medium-sized enterprises (SMEs) account for 99% of UK businesses and around half of the turnover in the UK public sector, according to the Federation of Small Businesses.

Founded in 2016, Tide is a challenger banker that focuses on UK SMEs and offers them a range of financial products aimed at saving small business owners time.

However, Tide is expanding its horizons and its latest offering is – you guessed it – a payroll product.

The product, which has been created in collaboration with UK payroll vendor KeyPay, will be HMRC compliant and known as Tide Payroll.

In line with Tide’s general mission, Tide Payroll aims to simplify the often time-consuming, expensive, and burdensome process of payroll for SMEs. Laurence Krieger, Tide UK’s CEO, notes that Tide Payroll aims to take away the “pain” of business administration for SME CEOs.

“We looked at payroll and we realized that we could make it much cheaper and much faster for the business owner, saving them time and money,” adds Krieger.

Tide Payroll is in the beta testing stage currently, but since it has received good feedback from the UK SMEs using it so far, the company hopes to roll out the offering to other customers very soon.

PayActiv

Financial wellness FinTech PayActiv offers employees earned wage access (EWA). This enables them to stay on top of their bills, without relying on costly overdrafts or charges linked with payday loans.

To achieve this, PayActiv also has a solution for companies that allows them to pay salaries and reimburse expenses with ease. The company has also broadened into the wider HR tech space by helping employers to communicate better with distributed, remote teams — and therefore fill shifts easily and better engage and reward their staff.

As a result, PayActiv claims to save businesses with 5,000 employees, 25% of which are receiving paper paychecks in the post, more than $97,000 a year. In addition, offering EWA is proven to help to reduce employee turnover, which is incredibly costly for businesses.

PayActiv secured $100m in Series C funding, enabling the company to expand its customer base, which currently includes Walmart, Subway, and Hilton.

Talking about the funding, PayActiv CEO and co-founder Safwan Shah noted: “The PayActiv platform is the only system where everyone wins.

“Employers lift worker morale with little to no cost and huge dividends; employees get wages when they actually need them most; and cash re-enters the economy faster, making communities financially healthier.”

Cwallet

Launched in 2019 to enable low-income workers in Qatar to access financial services even if they did not have a debit or a credit card, Cwallet has expanded its offerings and now intends to be a one-stop-shop for users to pay and spend, as well as receive their salary in a compliant manner.

CWallet’s employer-focused product provides labor law compliant payroll, as well as improves the experience of employees.

In January this year, Cwallet closed a $200,000 pre-Seed round and announced it was working with the Qatar Central Bank to run their payroll processes, according to HR Tech Radar.

Talking about the funding, Cwallet CEO and co-founder Michael Javier commented:

“We are looking to make payment gateways affordable in Qatar, paving the way for smaller businesses to process online transactions with ease and affordability.

“The mission has always been to provide payment solutions for all users without exception.”

It may be one of the first blockchain wallets to offer payroll services, but it will most certainly not be the last.

Stripe and Check

In January 2021, payment processing software FinTech Stripe led Check’s Series B. Check is a platform for building new payroll products. As a result of the funding, Check has now launched onto the market.

Check aims to expand the groundwork companies like Stripe and PayPal laid for customers to pay businesses — and now allow customers to use a similar technological platform to quickly pay their employees.

The company offers an API-first embedded payroll vertical that can be integrated into other SaaS and HR tech platforms companies are already using.

In a blog post talking about the funding, Check’s three co-founders Andrew Brown, Vivek Patel, and Eric Stromberg wrote: “We’re thrilled to partner with Stripe on this journey.

“We share an aligned worldview with Stripe, centered around the belief that wage payments should be programmatically addressable. And that by making that possible we will unlock a wave of innovation in the payroll market.”

Stripe’s product acceleration lead Chris Sperandio said: “Check has developed an elegant solution that abstracts complexity, reduces risk, and removes friction in the payroll process that every company has to navigate.

“The Check team is uniquely suited to continue innovating in this domain and make paying people simple.”

BitPay

An emerging trend in the FinTech industry is the growing use of cryptocurrencies — the KPMG report believes this will be a top trend in 2021 and may “open up tremendous opportunities in the cross-border payments space”.

Beyond that, FinTech is also exploring whether it can facilitate the payment of employees in cryptocurrencies.

One example is cryptocurrency payments platform BitPay. In November 2020, the FinTech announced it was launching a new service – called BitPay Send — enabling businesses to pay their employees en masse with the cryptocurrency of their choice.

BitPay Send is focused on driving payroll efficiencies for companies with international employees, as well as those working in the fast-paced gig economy space.

The companies in question do not need to buy, own or manage the cryptocurrency, but they will be charged a 1% fee for using BitPay Send. Employees will need to have a BitPay ID and a cryptocurrency wallet to receive payments, however.

Cryptocurrencies are not new to the HR tech space. By entering the payroll space, BitPay is challenging the likes of BitWage, which provides wages and payslips in cryptocurrencies to employees, particularly those working remotely.