VANCOUVER — Payfare, a Toronto-based fintech that provides services for gig workers and has partnerships with Uber, Lyft and DoorDash, has filed for an initial public offering on the Toronto Stock Exchange, hoping to capitalize on the expansion of the gig economy during the COVID-19 pandemic.
The company, with investors including Bluesky Digital Assets and Rocket One Capital, has not yet disclosed how much money it is looking to raise through the offering.
Payfare, a Toronto-based company that provides digital banking services for gig workers, has filed for an initial public offering on the Toronto Stock Exchange. While it has not yet disclosed how much money it is looking to raise, the company said it plans to use about $21 million of the expected proceeds to repay debt, and the remainder to fuel its growth.
“The global COVID-19 pandemic created a surge in on-demand products and services, demonstrating the essential nature of the gig economy,” reads a letter from the company’s three co-founders included in its preliminary long-form prospectus. E-commerce has surged as governments encouraged customers to stay home, with people embracing online shopping for all types of goods and services. Meanwhile, the letter says, there’s been mass adoption of digital financial services. “These trends are wind at our back, as we expand our services to other independent workers.” Payfare declined to comment through its lawyers, who cited compliance with securities legislation.
The pandemic also created an environment where more people were pushed into or chose to take on gig work as unemployment hit record highs in Canada and the U.S. “More people turned to gig platforms as their primary source of income due to job loss, or to supplement family income due to reduced household employment,” the filing reads. “Many of these gig workers are expected to remain in the gig economy.”
Founded in 2015, Payfare operates in Canada, the U.S. and Mexico, providing financial-service platforms for gig workers. It aims to solve these workers’ unique financial challenges, namely “the problem of delayed earnings payments and immediate cash expenses,” according to its prospectus. Many gig workers wait a week or longer for payment from the platforms to which they contract their services, but face daily expenses for gas and other overhead. They may also not be able to open traditional bank accounts, or can access earnings faster through a third-party payment processor that charges a fee, the prospectus says.
Payfare partners with clients—which currently include Uber, Lyft and DoorDash—to offer their workers “free, instant access to their earnings—paid to a co-branded payment card and digital bank account” that is powered by Payfare. The gig workers who enroll are issued a card, and must download Payfare’s app. Their money is moved to that card and digital bank account as soon as it’s earned. The worker can then use it immediately to pay bills, withdraw at an ATM or complete other functions. They can also earn rewards through the app. DoorDash’s delivery drivers, for example, earn two per cent cash back when buying gas, regardless of where they buy it.
The company believes gig-economy firms that use its platform will see increased worker loyalty, reducing turnover and acquisition costs. Workers using the payment platform are more likely to work more hours, according to Payfare, because they’re “not negatively impacted by traditional payment cycles.”
Payfare says it offers new revenue opportunities and data insights to its gig-economy partners. The clients can earn money “through interchange earned through the payment networks and additional product and service offerings,” according to the prospectus. Payfare also collects anonymous data on workers’ spending habits, which it says its clients can deploy to better understand and support their workforce and better create satisfaction and loyalty.
Payfare’s existing multiyear contracts have helped it drive payment volume and revenue growth, the prospectus says. About 60 per cent of the company’s revenue comes from network-interchange fees, while the remainder comes from user-banking fees, including ATM withdrawals and foreign exchange. Since 2016, its revenue has grown from just under $24,000 to $13.1 million for the 12 months ending Sept. 30, 2020.
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Payfare has raised an undisclosed amount of money from its investors, according to PitchBook. It completed its last financing round in August 2016, with Bluesky and Rocket One coming onboard as new investors. The prospectus says the company expects to use the proceeds from its initial public offering to pay back some debt—roughly $21 million—and support its growth strategy. The lead underwriter on the offering is Stifel Nicolaus Canada.
The company has yet to record a profitable year, according to selected financial information included in the filing. For the nine months ended Sept. 30, 2020, it recorded a net loss of roughly $20.6 million, compared to about $17 million for the same timeframe the previous year. In 2019, it reported a nearly $24-million net loss, up from about $13.4 million in 2018.
Payfare expects to keep growing alongside the booming gig economy, according to the prospectus. As its current clients grow, the company intends to capture more market share—expecting, for example, to expand its partnership with DoorDash to Australia in the future. The prospectus says Payfare also plans to expand beyond transportation-related services, into on-demand platforms for things such as freelance work and short-term home rentals. It won’t be limited just to the gig economy, with an eye toward trucking, social media influencers and other areas that employ independent hourly or salaried workers. It will also expand its products and services to create new revenue streams and is exploring areas including micro credit, international remittance, health and insurance benefits, and credit-building tools.