Branch Raises $48M to Accelerate Payments to Workers

Branch Secures $48 Million Series B and $500 Million Credit Facility

Branch, a company specializing in workforce payment solutions, has announced the successful completion of a $48 million Series B funding round. Concurrently, they have also finalized a $500 million credit facility.

Funding Details

Addition, led by Lee Fixel – an investor in companies like Flipkart, Stripe, and Coinbase – spearheaded the equity financing. The credit facility was established through purchased assets from funds overseen by Neuberger Berman.

Several other investors participated in the equity funding, including Drive Capital, Crosscut Ventures, Bonfire Ventures, Matchstick Ventures, and HR Tech Investments LLC, a subsidiary linked to Recruit Holdings Co., Ltd. (affiliated with the job site Indeed). This latest funding brings Branch’s total equity raised since its 2015 founding to $58 million.

This investment represents Branch’s first funding round since 2017.

Revenue Growth and Platform Expansion

Branch CEO and founder, Atif Siddiqi, has not disclosed the valuation of this current funding round. However, he revealed that the company experienced a substantial 300% year-over-year revenue increase in 2020. Furthermore, the number of enterprises utilizing their platform grew by 700% during the same period.

Initially, Branch aimed to provide a more efficient and affordable method for companies to compensate employees and contractors. This approach is intended to enhance talent acquisition and retention while reducing costs compared to conventional payment systems.

Evolution of the Platform

The company’s initial focus was on enabling workers to take on additional hours at their existing jobs to increase their earnings. However, the team subsequently explored additional avenues to provide financial assistance to these workers.

“Our access to diverse enterprise systems and the collection of valuable employment data proved crucial,” Siddiqi explained to TechCrunch. “This data allowed us to develop a superior financial service experience tailored to this demographic.”

Branch primarily serves individuals with low to moderate incomes, functioning as an intermediary between companies and their worker payment processes.

Expanding Service Offerings

The platform began with earned wage access and subsequently accelerated payment processing for workers. It has since broadened its capabilities to include services like digital tip payments.

Siddiqi illustrates this with an example: “Many Domino’s franchisees lacked sufficient cash to adequately tip their drivers.” To avoid ATM visits, drivers began utilizing Branch’s Wallet, enabling franchise owners to instantly distribute tip payments after a shift’s completion.

“Tips constitute approximately 40% of a driver’s monthly income, making this a significant benefit,” Siddiqi stated.

Branch then extended its services to contractor payments, facilitating faster compensation for 1099 contractors through a standardized payment experience.

“We set out to create a fundamentally better financial service experience, and that’s where Branch stands today,” Siddiqi affirmed.

Monetization and Free Options

Branch prioritizes offering numerous free services, such as waiving fees for instant transfers to the Branch Wallet and non-instant transfers to external financial accounts.

The startup primarily generates revenue through interchange fees, similar to many other fintech companies. A transaction fee is also applied for instant fund transfers from the Branch Wallet to another financial account.

“Accelerated payments offer a compelling and transformative benefit for today’s workforce,” Siddiqi emphasized. “We’ve observed its positive impact on cash flow for both companies and workers, and we are eager to deliver instant payments and innovative tools to a wider range of industries and workforces, including those reliant on paychecks and independent contractors.”

Strategic Partnerships and Market Expansion

To expand beyond the earned wage access market, which is valued in the billions of dollars, Branch has ventured into contractor and influencer payments. This includes a new partnership with influencer marketing platform Tagger and collaborations with various on-demand delivery services.

Recent agreements include a partnership with Kelly, a global staffing firm. Additional clients include Delivery Drivers, Inc. (DDI), a contractor management solution focused on last-mile delivery, and Rippling, an HR and IT management platform.

Competitive Landscape

Branch shares similarities with another fintech company, GigWage. However, according to Siddiqi, a key differentiator is Branch’s development of its own payment rails and system for instant fund disbursement, alongside its offerings for traditional W-2 employees.

Industry Perspective

Drive Capital partner Andy Jenks believes Branch’s financial services effectively address pay cycle gaps and cash flow challenges, potentially saving both workers and companies time and money.

“We’ve witnessed the significant impact of Branch’s accelerated payments for employers and the W-2 workforce,” Jenks stated via email. “We anticipate their expansion into contractor payments, where they can serve rapidly growing sectors like last-mile delivery, logistics, and influencer marketing.”