The “gig economy” has spawned a collection of startups focused on serving the needs of freelancers and freelancers, from job marketplaces Upwork and Fiverr to customer management tools like Honeybook.
London-based SteadyPay is focused on tackling a major problem for these workers – income volatility – which can make managing personal finances much more complicated. Workers who do not have a regular income often do not have access to loans from traditional financial institutions, which prevents them from making ends meet.
SteadyPay CEO and co-founder John Downie, who had spent most of his career developing technology solutions for banks, realized that existing lending solutions did not meet the needs of income workers. irregular.
“Decades of traditional underwriting and a heavy reliance on FICO credit scores have stymied a lot of innovation in the space. While for the self-employed and self-employed there were other solutions for pensions and the like, there was very little in the credit space [before SteadyPay]”Downie said.
Founded in 2018, SteadyPay’s core offering is its income smoothing product, which tops up a user’s bank account when their income falls below their monthly average. Users pay a monthly fee of £4 per week, or just over $5 per month, for the service. They can repay top-ups without interest and only owe repayments to SteadyPay when they earn above their average income in any given month, Downie told TechCrunch in an interview.
The company has more than 9,000 active users on the platform across various industries, most of whom are between the ages of 22 and 40, Downie said.
Downie described SteadyPay’s model as “Netflix for credit,” explaining that early conversations with customers illustrated their desire for a simple, uninspiring product. He found that users were not necessarily looking for the product with the absolute cost, but rather a predictable and stable solution.
The company subscribes users to the platform through an artificial intelligence-based model. Its algorithm primarily leverages information from “open banking” data, which is secure customer information that major UK banks are required by law to share with third parties and technical service providers. It also incorporates certain transactional banking data and users’ public social media information to predict users’ creditworthiness, Downie said.
The average monthly top-up per customer is around £250, and the maximum balance a user can hold on SteadyPay at any time is capped at £1,000, Downie’s co-founder and COO/CFO told TechCrunch. Steady Pay, Oleg Mukhanov. Since moving from a more manual, rules-based underwriting process to the AI-based algorithm, SteadyPay’s customer default rates have remained consistently below 10%, he added.
SteadyPay now makes loans directly from its balance sheet, a strategic move, according to Downie, that helps the company maintain full control over its underwriting process. Eventually, however, the startup will likely partner with a local bank to provide the capital, he added.
SteadyPay co-founders Oleg Mukhanov and John Downie. Picture credits: SteadyPay
SteadyPay today announced that it has raised $5 million for its Series A funding round led by European venture capital firm Digital Horizon, which specializes in fintech and SaaS companies. Digital Horizon isn’t new to the space — the fund is also an investor in Oxygen, a San Francisco-based startup that also offers a credit product aimed at freelancers and has reportedly been in talks to raise $70 million to 500 millions of dollars. plus evaluation at the end of last year.
Existing and new investors participated in SteadyPay’s latest fundraising alongside Digital Horizon, including Ascension Ventures (through their impact fund Fair By Design), the UK government’s Future Fund and some angel investors, according to the company. . SteadyPay increased its funding round in 2020, bringing in £2.9 million in debt and equity funding at the time.
In addition to adding an integrated B2B offering to its platform, the company plans to use the new funds in three areas, Downie said.
One of the goals is to develop additional products, in part by leveraging its wealth of data to make AI-powered insights available to users. Another priority is expanding its customer base by targeting small business owners and micro-entrepreneurs, who often face similar income challenges to freelancers and have a similar risk-reward profile, according to Downie.
The company also wants to use the new capital to expand into “at least one” international market, Mukhanov said.
Although Mukhanov did not name a specific country the company is targeting, he said the United States would be a favorable market for the product because “the percentage of self-employed [in the U.S.]is even higher than in the UK, and the level of government support or other social support is even lower…meaning the need for this product would be even higher.”