Venice-based Rain Technologies Inc. is giving workers access to income before their pay day arrives. The financial wellness company landed $116 million of funding at the end of last month, which it said is the largest series A raise in HR tech history.
“We built Rain to empower people, especially hourly workers, to take control of their finances and eliminate the need for predatory payday loans,” Rain Chief Executive and Co-founder Alex Bradford said in a statement.
Rain’s Instant Pay app was launched in 2020. The new funding includes $66 million from QED Investors and Invus Opportunities and a $50 million debt facility from Sound Point Capital Management.
With the new funding, Rain will continue its growth by investing in infrastructure, employees and marketing.
The Instant Pay app gives workers an advance on their wages prior to their next paycheck, which can be accessed shortly after a shift. Employees can withdraw up to 50% of their next paycheck’s earnings, with a minimum $75 withdrawal. Users pay an instant processing fee averaging $3, akin to an ATM charge. Rain’s revenue comes from this fee as well as some SaaS revenue from partners.
To date, it has disbursed more than $150 million in earned wages to users.
The company said it offers an alternative to a payday loan. Payday loans are short-term and high-cost, and the employee must pay back borrowed funds in full quickly with interest rates that may be predatory. California passed a state law in 2019 that capped payday loan amounts at $300 and fees for a deferred deposit transaction at 15% for a maximum fee of $45. However, the California Department of Financial Protection & Innovation said that the short-term conditions of these loans mean that a 15% fee equates to an annual percentage rate of 460% for a two-week loan.
Rain says there is no prepayment fine for its early wage access offerings and that, other than the transaction and services fees, there is no interest required upon repayment. It is free to employers who offer their employees Rain’s services as a voluntary benefit and integrates it in companies’ existing payroll system.