Fintech: Earned-Wage-Access ZayZoon raises $35MM; Mesh's $22MM for embedded finance and digital asset APIs
ZayZoon is an earned waged access fintech, providing employees with a loan for any wages they have earned but have not yet been paid for.
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LENDING: ZayZoon, which lends employees money for a fee, raises $34.5MM (link here)
EMBEDDED FINANCE: Mesh Raises $22MM in Series A Funding To Redefine the Embedded Financial Ecosystem (link here)
LONG TAKE: Comparing MetaMask's Snappy Transition to a Developer Platform with Apple, Ant Financial, and ChatGPT (link here)
PODCAST CONVERSATION: MoneyLion's evolution from neobank to financial education marketplace, with CMO Cynthia Kleinbaum Milner (link here)
CURATED UPDATES
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Digital Investment & Banking Short Takes
LENDING: ZayZoon, which lends employees money for a fee, raises $34.5MM (link here)
Fintech lender ZayZoon has raised $34.5MM in Series B funding from Framework, EDC, and ATB Financial. ZayZoon is an earned waged access (EWA) fintech, providing employees with a loan for wages earned but not yet been paid. Users pay a $5 monthly fee and can withdraw between $20-200 every pay period. There is also a no-fee option, which pays employees with gift cards for brands like Target and CVS, as well as requiring personal information (date of birth, gender, name, etc.) for advertising purposes.
Since its founding 10 years ago, the company has acquired 10,000+ business customers in the US and over 160 payroll provider partners. The product is primarily geared towards low-income workers, who may need early access to funds for bills and other monetary needs, with the intention of keeping them away from payday loans and overdraft bank fees. ZayZoon also claims to help employers recruit and retain employees by providing them with more flexible pay arrangements.
Despite the positive claim of helping customers avoid taking on loans with interest, many are beginning to decry EWA. Those against it argue that ZayZoon and other EWA companies should be considered loans under the U.S. Truth in Lending Act. This act provides protections for users, including requiring lenders, to provide an advance notice before increasing some charges. It is worth noting that ZayZoon users are not legally obligated to repay the advance paychecks and no legal action will be pursued in that instance.
Other criticisms argue that ZayZoon simply prolongs the challenges faced by their users. The $5 fees add up for low-income workers and may eventually culminate in users taking on the predatory loans that EWA companies claim to help them avoid. For context, 20% of US families do not have two weeks of liquid savings, highlighting how easy it can be to dig a deeper financial hole, even with small loans at a set price. Regarding the benefits to companies, a study by Walmart suggests that providing employees with access to earned wages early typically results in employees quitting faster. Yet despite these challenges, EWA usage has grown significantly in recent years with workers accessing $9.5B in 2020 via EWA apps vs $3.2B in 2018.
Regulators are beginning to take note; for instance, Nevada now requires EWA providers to be audited, and reviewed by the state. Missouri also passed a law requiring EWA companies to register with the state, as well as to keep all payments records for at least two years. The challenges posed by EWA may continue to scale as adoption increases, and more studies on the adverse effects need to be conducted before EWA companies are reviewed at a federal level.
Notably, if money was earned and disbursed in real time (which it can be), then employees would be better off, and employers would no longer be implicitly subsidized by their workers.
EMBEDDED FINANCE: Mesh Raises $22MM in Series A Funding To Redefine the Embedded Financial Ecosystem (link here)
Mesh, previously known as Front Finance, has raised $22MM in a Series A led by Money Forward, Inc. and participation from investors like Galaxy, Samsung Next, Streamlined Ventures, and others, bringing total funds raised to $32MM.
Founded in 2020, Mesh has its sights set on the convergence of traditional finance (TradFi) and decentralized finance (DeFi) through the use of 300+ API integrations that can connect to brokerages, exchanges, a variety of self-custody and crypto/Web3 wallets and have it all in one unified view. These integrations allow both retail and institutional customers to bring together a variety of financial activities — digital asset transfers, crypto payments, and real-time account aggregation that includes crypto and equities.
While we believe this convergence is inevitable, the necessary infrastructure to achieve this level of interoperability, at scale, is still in its early innings.
For the better part of a decade, Wealthtechs, Fintechs, and TradFi domains have endeavored to build and actualize an “all-in-one” concept for traditional finance.
Whether it’s one platform to view a customer's investments from various accounts — as demonstrated by platforms like Arta Finance, Masttro, AdvisorEngine, and Empower — or one app to service a customer’s banking, lending and cash management needs — like SoFi, Intuit Mint, Betterment, and Revolut — the result is an industry still fragmented, but experiencing rapid maturity.
Institutions are recognizing the importance of integrating digital assets with traditional products, but technology integration is still complex. A study of advisors by wealthtech Orion revealed that 1 in 10 say their firm has all the technology solutions it needs. Meanwhile, Fidelity Digital Assets highlights that 81% of wealth managers believe digital assets play a crucial role in a portfolio and 74% plan to buy or invest in the future.
At a time when customers are increasingly demanding a unified, connected view of their financial profiles and exposure to digital assets, the marketplace has not had enough time, yet, to offer solutions that integrate these elements in a secure way. Enter Mesh. According to its site, aggregations can be performed on a customer’s brokerage and crypto accounts without ever having to leave the app in one integration.
Mesh has just scratched the surface of the market potential. Incumbents are still relatively untroubled; with core markets across asset classes still unchallenged. As money becomes increasingly more automated, embedded, and digital, services like these will grow faster than their analog counterparts. For a comp, see Onramp Invest and Securitize below.
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Blueprint Deep Dives
Long Take: Comparing MetaMask's Snappy Transition to a Developer Platform with Apple, Ant Financial, and ChatGPT (link here)
MetaMask, the Web3 wallet developed by Consensys, has introduced a feature called "Snaps" which enables third-party developers to create extensions enhancing the wallet's functionalities.
The extensions can be categorized into three groups: connecting to blockchains that were previously unsupported by MetaMask, enhancing security by advising users on the safety of transactions, and improving the wallet's usability by incorporating messaging and communication features. Contrary to traditional applications where multiple financial accounts are tied to a single identity, the Web3 space utilizes financial identity to link various media and information channels, transitioning the wallet into a platform that is more secure, interconnected, and social. We highlight the issues around platform and network models, resembling the open architecture that has powered the success of platforms like Apple.
Podcast Conversation: MoneyLion's evolution from neobank to financial education marketplace, with CMO Cynthia Kleinbaum Milner (link here)
In this conversation, we chat with Cynthia Kleinbaum Milner - Chief Marketing Officer at MoneyLion, a FinTech company providing financial access to Middle America. She is accountable for brand building, customer acquisition, and customer retention efforts on both the business’s B2C and B2B sides of the business.
Prior to joining MoneyLion, Mrs. Milner was instrumental in the digital transformation of Walmart, where she served as the marketing leader for the CEO’s top-priority projects. She led the launch of Walmart’s highly- anticipated membership program, Walmart+; the expansion of its Online Grocery business during the Covid-19 years; the relaunch of its award-winning omnichannel mobile app; and the growth of its then-nascent consumables e-commerce business.
Curated Updates
Here are the rest of the updates hitting our radar.
Neobanks
⭐ Zambia’s Lupiya raises $8.25m Series A round to grow neobanking business - Disrupt Africa
Payments
⭐ Curve secures £133 million in Series C, signals 2024 profitability - Finextra
After cutting ties with Binance, Checkout.com says crypto companies are about 4% of its total processing volume - TechCrunch
Hyperjar's growth strategy: $24M funding for recruitment and expansion - Tech EU
Digital Investing
⭐ Allocate raises $10 million to open top VC doors to wealth advisers - Axios
Fleximize receives £136 Million financing from Goldman Sachs and Citi - Finextra
Financial Operations
⭐ Flex secures $20M equity and $100M debt fundraise to build a one-stop-shop financial hub for SMBs - Refresh Miami
European carbon accounting startup Plan A raises $27M from VC and corporate heavyweights - TechCrunch
MakersHub deciphers accounts payable data so construction companies don’t have to - TechCrunch
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