Koho Financial, an online financial services provider, has raised $210 million in venture capital as it tries to expand its services to offer a new alternative to payday loans in Canada, The Globe and Mail reported on Tuesday. February 1st.
Koho’s mobile app provides a savings account at no cost, and it has grown its user base to over 500,000 since the pandemic. The app allows users to accumulate savings in a way that’s akin to a regular high-interest savings account, but at no cost.
Users can spend funds with a prepaid card, and the company derives its revenue from transaction fees collected from retailers. According to the report, this new funding will see Koho lean more towards loan products that can give free early access to his next paycheck, several days before payday.
Through a partnership with Automatic Data Processing (ADP), users will also be able to access up to 50% of their salary at any time, interest-free.
According to CEO Daniel Eberhard, the growth shows there’s more demand for ways to manage money and digital options for those who don’t want to go to a physical building.
“About half of Canadians are living paycheck to paycheck, waiting two weeks to get paid,” Eberhard said. “We want to be able to help individuals access the money they’ve already created and not have to turn to payday loans or go into excessive debt.”
The funding round was led by new investor Eldridge, which is a Connecticut-based holding company that invests in technology, insurance, asset management, mobility, sports and gaming, media and real estate, among other industries.
There were also commitments from returning investors TTV Capital, Drive Capital and Portage Ventures, a wing of Power Corp.’s alternative investment arm, Sagard Holdings. The round also included investments from the Healthcare of Ontario Pension Plan, Round13 and the Business Development Bank of Canada.
In other Early Paydays news, Revolut launched a partnership with UK employers to offer similar services last fall, PYMNTS reported.
Read more: Revolut Intros Payday Early Access to UK Salaries
The service, simply called “Payday”, allows employees to debit a portion of their salary as they earn it, instantly getting the funds into their accounts.
Revolut founder Nik Storonsky said the company believes in “the importance of making financial wellbeing accessible to everyone, and that includes focusing on the impact of financial stability on people’s mental health. employees”.