DailyPay sells bonds tied to fees on wages that workers tap instantly

Fintech company DailyPay this month sold $200 million in bonds backed by fees tied to the company’s main service, an app that lets workers access pay as soon as they’ve earned it rather than wait for paychecks. 

Barclays led the sale, which consisted of three investment grade rated bonds and one rated junk, according to Bloomberg News deal information. Investors bought the highest rated and largest of the bonds for interest payments of 1.75 percentage points above Treasuries, or 5.63% per year, Bloomberg reported. 

The transaction closed on June 25, according to the company. 

“This is a first-of-its-kind type of deal, and it will help us expand the number of employees we work with,” Stacy Greiner, the company’s chief executive officer, said in an interview. 

DailyPay works with over 1,000 companies and its technology is used by over five million employees, according to the company. Employees who’ve signed up for the service can access their earnings the next day for no fee, or they can transfer them instantly for $3.49 or less, according to DailyPay’s website. 

Most who use the app consistently choose instant transfer, with over 91% of all disbursements made in a recent 12-month period made that way, according to a Morningstar DBRS press release.

The nature of DailyPay’s product has drawn legal scrutiny. In April New York’s state Attorney General Letitia James sued the company and one of its competitors in Manhattan Supreme Court for allegedly charging fees above the rates allowed under state law. DailyPay sued James in federal court ahead of the lawsuit, arguing that its product isn’t a loan under New York law. 

A spokesperson for DailyPay declined to comment on the litigation. 

DailyPay is part of a broader group of companies looking to cater to workers who may struggle with access to cash between paychecks. Many of these companies offer payday loans and make money by charging interest on those loans.

With the latest $200 million securitization, DailyPay has nearly $1 billion in debt financing backed by its On-Demand Pay receivables, which includes its existing $760 million secured debt facility with Barclays, Citi and TPG Angelo Gordon, the company said.