The “GiG economy” has spawned a host of startups focused on meeting the needs of freelancers and freelancers, from job marketplaces Upwork and Fiverr to customer management tools like Honeybook. Based in London SteadyPay focuses on solving one of the biggest pain points for these workers, income volatility, which can make managing personal finances much more complicated. Workers who lack a regular income stream are often unable to access loans from traditional financial institutions, making it difficult for them to make ends meet.
CEO and co-founder of SteadyPayJohn Downie, who spent most of his career developing technology solutions for banks, realized that existing lending solutions weren't addressing the needs of workers with irregular incomes.
“Decades of traditional underwriting and a heavy reliance on risk securities under the FICO model have held back a lot of innovation. 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. prior to SteadyPayDowny said.
Founded in 2018, the core offering of SteadyPay is their income smoothing product, which tops up a user's bank account when their earnings fall 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 interest-free and only owe refunds to SteadyPay when they exceed their average income in a given month, explained CEO and co-founder John Downie.
The company has more than 9000 active users on the platform in a variety of industries, most of whom are between the ages of 22 and 40, Downie said.
Downie described the model of SteadyPay as "Netflix for credit," explaining that early conversations with customers illustrated their desire for a simple, interest-free product. He found that users weren't necessarily looking for the product because of the cost; instead, they wanted a solution that was predictable and stable.
The company signs up users on the platform through a model based on artificial intelligence. Its algorithm primarily leverages information from “open banking” data, which is secure customer information that large UK banks are required by law to share with third parties and technical service providers. It also incorporates some transactional banking data and public social media information of users to predict users' creditworthiness.
The average monthly top-up per customer is approximately £250, and the maximum balance a user can carry on SteadyPay at any given time is capped at £1,000. Since moving from a more manual, rule-based underwriting process to an AI-based algorithm, customer default rates for SteadyPay have been consistently below 10%.
SteadyPay offers loans directly, a strategic choice that helps the company maintain full control over its underwriting process. Eventually, though, the startup will likely partner with a local bank to provide the capital.
SteadyPay got 5 million dollars in one round Serie A Led by European venture capital firm Digital Horizon, which specializes in SaaS and fintech companies. Digital Horizon is not a new VC: The fund is also an investor in Oxygen, a San Francisco-based startup that also offers a loan product aimed at freelancers and was reportedly in talks to raise a $70 round. to 500 million or more.
Both existing and new investors participated in the latest fundraiser of SteadyPay along with Digital Horizon, including Ascension Ventures (through its Fair By Design impact fund), the UK government's Future Fund and some individual investors, according to the company. SteadyPay performed their seed round in 2020 providing £2,9m of debt and equity financing at the time.
One goal is to expand into additional products, in part by leveraging its volume of data to make AI-powered insights available to users. Another priority is expanding its client base by targeting small business owners and microentrepreneurs, who often face similar income challenges as freelancers and have a similar risk-return profile.
The company also wants to use the new capital to expand into “at least one” international market, the company said.
If you didn't name a specific country, they conveyed that the US would be a favorable market for the product because "the percentage of freelancers there is even higher than in the UK, and the level of government support or other social support is even lower... which means that the need for this product would be even greater.”
