Fintech Spotlight: Los Angeles’ Rain Secures $75M Series B Funding Round
Rain, an innovative startup revolutionizing the earned wage access (EWA) landscape, has successfully secured $75 million in an all-equity Series B funding round. This funding will enable Rain to enhance its offerings, which already include financial wellness features like overdraft alerts and spending trend analytics.
Funding and Future Plans for Rain
The recent funding round was led by Prosus, valuing the company at $340 million. Co-founder and CEO Alex Bradford shared exclusively with TechCrunch that Rain intends to use these funds to introduce additional products, including credit cards and savings accounts.
Addressing Financial Challenges in the U.S.
According to a report by Bank of America, approximately 35% of U.S. households earning below $50,000 live paycheck to paycheck, a slight increase from 32% in 2019. This trend underscores the necessity for solutions like EWA platforms, which provide employees with early access to their earned wages.
How Rain Stands Out in the EWA Market
Unlike many of its competitors, Rain aims to streamline the process for employers. Bradford notes that their platform integrates seamlessly with major payroll and timekeeping systems, significantly reducing the manual effort required from employers:
- Minimal onboarding work
- Automated features for day-to-day operations
Proven Success and User Engagement
Founded in 2019 and based in Los Angeles, Rain has successfully onboarded over 2.5 million employees and disbursed more than $2 billion in earned wages. The Rain app not only facilitates wage access but also aids employers in retaining talent.
Rain primarily targets mid-market and enterprise clients with over 300 employees. The platform charges a nominal fee for instant transactions, typically around $3, while also offering a free ACH option for users.
Expanding Financial Wellness Services
Rain is committed to going beyond a typical EWA app. The startup provides:
- Financial education portal
- One-on-one financial coaching
- Free tax filing and refund services through their partner, April
These additional services contribute to 70% of Rain’s monthly adoption rates, with the EWA feature accounting for the remaining 30%. Bradford emphasizes that the goal is to reduce reliance on EWA as users improve their savings habits.
Upcoming Innovations and Market Position
The Series B funding round included participation from Nextalia Ventures and Spark Growth Ventures, as well as existing investors such as QED and Invus Opportunities. This capital will enable Rain to broaden its services beyond EWA.
In Q3, Rain is set to launch an EWA-secured credit card, featuring a dynamic credit limit based on verified earned wages. Additionally, they are developing a product to simplify Health Savings Account (HSA) transactions and are planning to introduce savings accounts later this year.
Market Trends and Regulatory Environment
The funding landscape for fintech, including EWA platforms, has been fluctuating. A PitchBook report indicates that global fintech funding decreased by 45% year-over-year, with EWA funding specifically rising by 19%. Unlike employee-side platforms that have faced regulatory scrutiny, Rain’s employer-integrated approach offers a more sustainable model for financial wellness.
Commitment to Financial Freedom
“Building a more comprehensive platform of financial wellness products will certainly help us realize our mission, which ultimately is to help millions of people get on the path to financial freedom,” stated Bradford.
With a dedicated team of 175 employees, Rain is scaling its market presence by investing in sales enablement, marketing, and channel partnerships. In 2023, the startup previously raised $116 million in a Series A funding round, comprising both equity and debt components.
