Rain, a fintech startup that provides earned-wage access to hourly workers shortly after their shift ends, has raised $116 million to speed up hourly workers’ pay cycles. The service helps individuals avoid overdraft fees, low balance fees, and high-interest rates associated with payday loans and credit cards.
The funding round, led by QED Investors and Invus Opportunities, has secured a $250 million valuation for Rain. Other investors include Wndrco, Tribe Capital, and Dreamers VC co-founded by Will Smith. Rain’s main competitor is DailyPay, which also integrates directly with employers’ payroll systems.
Rain operates under wage-assignment law and does not provide a credit product. Instead, it allows employees to access their earned wages before payday by charging them a fee, which averages around $3 every time they access their wages. The funding for Rain’s short-term advances comes from a debt facility arranged by Sound Point Capital Management.
Rain has already been adopted by major companies such as McDonald’s, Taco Bell, Applebee’s, Marriott, and Hilton, with over 400,000 employees now using the service. Since launching in March 2020, Rain has distributed over $150 million in wage advances, providing workers with the flexibility they need to manage their finances.
The startup plans to use the new funding to launch its own card product and expand into other financial products such as health savings accounts. Rain’s goal is to become a one-stop-shop for hourly workers’ financial needs, providing them with easy access to a range of financial products and services.
Rain’s success has not gone unnoticed by regulators, who are beginning to look more closely at earned-wage access products to determine if there is consumer credit involved. However, Rain operates under wage-assignment law, which allows employees to assign a portion of their future wages to a third-party provider in exchange for immediate access to funds.
Rain’s CEO, JR Robertson, believes that earned-wage access is the future of payday lending. He argues that traditional payday loans and credit cards are outdated and do not meet the needs of today’s workers, who often live paycheck to paycheck.
Robertson also believes that earned-wage access can help break the cycle of debt that many workers find themselves in. By providing workers with access to their earned wages, Rain can help them avoid costly overdraft fees and high-interest loans, giving them the financial breathing room they need to get ahead.
Rain’s success is a testament to the growing demand for earned-wage access among hourly workers. With millions of workers struggling to make ends meet, Rain’s innovative approach to payday lending is providing much-needed relief. As Rain continues to grow and expand, it is likely that other fintech startups will follow suit, bringing much-needed innovation to the world of payday lending.