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 for payday loans in Canada, The Globe and Mail reported Tuesday (Feb. 1).
Koho’s mobile app provides a no-fee savings account, and it has grown its user base to over 500,000 since the pandemic. The app lets users accumulate savings in a manner that is akin to a regular high-interest savings account, but no fees are charged.
Users are able to spend funds with a prepaid card, and the company makes its revenue from transaction fees earned from retailers. Per the report, this new funding will see Koho shifting more to lending products that can give free advance access to one’s 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 paycheck at any time, with zero interest.
According to CEO Daniel Eberhard, the growth shows that 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 paycheque to paycheque, waiting two weeks to get paid,” Eberhard said. “We want to be able to help individuals access the money they have already created and not have to turn to payday lending or take on 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-investing arm Sagard Holdings. The round also featured investments from Healthcare of Ontario Pension Plan, Round13 and Business Development Bank of Canada.
In other early payday news, Revolut rolled out a partnership with U.K. employers to offer similar services last fall, PYMNTS reported.
Read more: Revolut Intros Payday Early Wage Access For UK
The service, called simply ‘Payday,’ allows employees to draw down some of their wages as they earn them, instantly getting the funds to their accounts.
Revolut founder Nik Storonsky said the company believes in “the importance of making financial well-being accessible to all, and this includes focusing on the impact of financial stability on employees’ mental health.”
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