Wagely, a fintech company from Indonesia, gained recognition for its earned wage access service, allowing workers in Southeast Asian countries to access their salaries in advance without turning to loans with high interest rates. Having reached half a million users, the startup has broadened its business to include a more extensive “financial wellness” platform. To further boost this initiative, the company has recently secured $23 million in funding.
This news is particularly significant due to the funding challenges that startups in Indonesia have encountered over the past few years, highlighting the greater impact on developing countries compared to developed markets in the current technology downturn. In January, Indonesia’s Financial Services Authority reported a significant 87% decrease in Indonesian startup funding in 2023 compared to the previous year, dropping from $3.3 billion to $400 million.
Ordinary individuals face even greater economic pressure, not just startups. 
Despite the significant increase in the consumption of goods and services, salary growth across sectors has not kept pace. Employees are seeking ways to address their financial needs during periods between paydays.
However, credit access is not universal.
Many workers have limited access to banking services and do not have a credit history. At times, these employees may need to explore other options, such as seeking employment with more frequent paydays compared to the typical monthly cycle. This leads to a higher attrition rate for employers. Just like an underwriter, workers who are unable to borrow money from a bank or financial institution during emergencies can find themselves ensnared by loan sharks. These predatory lenders charge extremely high interest rates and engage in exploitative practices. It is understandable why significant banking institutions like JP Morgan have backed earned wage access as a financial solution that is advantageous to both employers and employees.
Companies in developed markets such as the U.S. and U.K. have widely adopted the concept of earned wage access, particularly in response to the effects of the COVID-19 pandemic on jobs and household incomes. In 2022, Walmart made a move to acquire an earned wage access provider in order to provide early pay access to its employees. Several major U.S. corporations, such as Amazon, McDonald’s, and Uber, provide their employees with the option to access their wages early.
Established in Jakarta, Wagely introduced that model to Indonesia in 2020 and expanded to Bangladesh in 2021. Providing earned wage access in these markets is deemed essential, given that 75% of Asian workers live paycheck to paycheck and earn considerably less than their peers in the U.S. and other developed nations.
“We are collaborating with companies to offer their employees the flexibility to access their salaries on any day of the month,” mentioned Kevin Hausburg, co-founder and CEO at Wagely, during an interview.
Similar to other earned wage access providers, Wagely imposes a small fixed membership fee on employees who choose to access their salaries ahead of time.
According to Hausburg, the fee typically ranges from $1 to $2.50, depending on the amount of the employees’ partial wages withheld as well as their location and financial situation.
Wagely, with around 100 employees split between Indonesia and Bangladesh, has paid out more than $25 million in salaries in 2023 across nearly 1 million transactions, benefiting 500,000 workers.
Following its most recent funding round revealed in March 2022, the startup experienced significant revenue growth and expanded its business threefold compared to the previous year, with specific figures remaining undisclosed. All the revenue is generated from the membership fee that the startup collects from employees. However, it continues to consume funds.
“We’re spending money quickly because it’s all about the numbers,” stated Hausburg. “Nevertheless, the profit margins and the business model are viable when operating on a larger scale.”
Wagely has been a pioneer in providing early-earned wage access in Southeast Asia, but the region has seen the emergence of several new competitors. It appears the startup is facing some competition. There are global companies that could potentially compete with Wagely by expanding into Indonesia and Bangladesh in the future.
Yet Hausburg emphasized that convenience sets the startup apart. According to the founder, it only takes three taps to go from downloading Wagely’s app or accessing its website through a browser to having money in your bank account.
“This stands out from the competition because other earned-wage access companies are prioritizing different aspects,” he stated.
Global earned-wage access providers have now turned their attention to lending, sometimes providing loans to employers. Some platforms may also incorporate advertising to generate revenue by promoting various products to workers. However, Hausburg mentioned that the startup avoided offering services that were not beneficial to the workers it serves, such as advertising.
Concentrate on meeting your customers’ needs. Stay focused and avoid prioritizing short-term profits,” he emphasized.
Wagely operates based on economies of scale. To be profitable, it must grow from half a million individuals to several million.
Capria Ventures is spearheading the latest funding round for the startup. The company intends to use the funds to further establish its presence in Indonesia and Bangladesh, broaden its range of financial services to include savings and insurance, and delve into generative AI-based applications such as automated document processing and local language conversational interfaces for workers.
Wagely has teamed up with Bangladesh’s Mutual Trust Bank and Visa to introduce a prepaid salary card for employees in the country. Bangladesh boasts a 40% smartphone penetration rate and a strong infrastructure for card-based payments and ATMs. The founder mentioned that they are monitoring other Asian countries but currently have no intentions to expand into new markets in the near future.
Wagely is not revealing the specific breakdown between debt and equity in this round, but they have confirmed it’s a blend of both. The debt portion will be allocated for salary disbursements. This was the startup’s first time raising debt, having previously received around $15 million in equity.
“Growing the business solely with equity is not sustainable, especially since we are pre-disbursing earned salaries to workers. To build the business sustainably, a strong partner on the debt side providing capital is essential.” And now was the time,” Hausburg informed Eltrys.
Employers do not directly offer upfront payment of wages; instead, they reimburse Wagely for the amount given to employees at the end of the pay cycle. The startup must ensure it has enough funds set aside to cover advance wages for employees on the platform. The startup ensures thorough screening of employer partners and collaborates with publicly listed and compliant private companies to reduce the risk of employers not repaying advanced wages to employees at the end of the pay cycle.
“The Wagely team has shown excellent execution with impressive growth in offering a sustainable and mutually beneficial financial solution for underserved blue-collar workers and employers,” stated Dave Richards, managing partner at Capria Ventures.
