National Post (National Edition)

Toronto gig-work fintech Payfare files for IPO


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 firm, with investors including Bluesky Digital Assets and Rocket One Capital, has not disclosed how much money it is looking to raise through the offering.

“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 did not immediatel­y respond to a request for comment.

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 enrol 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 or other functions.

The company believes gig-economy firms that use its platform will see increased worker loyalty, reducing turnover and acquisitio­n costs, among other benefits.

Payfare’s existing multiyear contracts have helped it drive payment volume and revenue growth, the prospectus says. About 60 per cent of the 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.

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 firm 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, according to the prospectus. As its current clients grow, the firm 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 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.

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