Payfare Inc’s (TSX:PAY) growth is being fueled by long-term contracts with businesses such as Uber, Lyft, and DoorDash
Capital Ideas Media | June 4, 2021 | SmallCapPower: The Gig economy, which now seems to include any independent work done on a freelance or temporary basis, has been growing in recent years and COVID-19 restrictions have accelerated that growth.
(Originally published on Capital Ideas Media on April 20, 2021)
One can only imagine what life would be like stuck at home during a pandemic without Uber Eats or DoorDash to bring us our favourite restaurant meals.
By 2023, the Gig economy will be valued at an estimated US$455 billion annually, up from $204 billion in 2018 according to Statista Research.
Newly-listed Payfare Inc. (TSX:PAY) is a financial technology (FinTech) company in the Earned Wage Access (EWA) space – that is, providing on-demand access to already earned wages not yet received through the traditional payroll cycle.
In doing so, the Company, by depositing funds on interest free debit cards, is disrupting current solutions that customers utilize for cash-flow shortfalls, namely high-interest credit cards and payday loans. PAY also provides targeted advertising and promotions to its users through its app.
Payfare’s growth is being fueled by long-term contracts with some of the biggest Gig economy businesses, including Uber (Canada), Lyft (US), and DoorDash (US, Canada, Australia). These platforms directly market PAY’s service to users as a benefit, which translates to a low cost of acquisition.
It also positions the Company well to grow internationally with its current and prospective partners, according to Stifel GMP analyst Cihan Tuncay.
“Our positive outlook is rooted in robust organic growth opportunities from the roll out of DasherDirect (for DoorDash drivers), a recovery in rideshare activity, and the potential for new contract wins over the next several quarters. There is a large addressable need for EWA and PAY is an early mover in the space. We think there are scale opportunities to eventually expand beyond gig economy platforms to hourly wage, shift work employment structures,” the analyst said.
Payfare recently reported 2020 revenue that surged 113% year over year to $13.5 million, and Mr. Tuncay is forecasting 2021 and 2022 sales of $30 million and $68 million, respectively, reflecting a partial recovery in rideshare activity in Canada (Uber) and the US (Lyft) when pandemic restrictions ease.
Payfare also noted that it increased its active user count by 54% from the end of December 2020 to the end of February 2021 and Mr. Tuncay estimates the Company will have about 193,000 active users by the end of 2021 and 337,000 users by the end of 2022.
As well, he said management is pursuing new contracts with other Gig economy platforms that could support user growth beyond his forecast, adding that PAY’s model can also easily be extended beyond Gig workers to other hourly wage or shift work employment categories such as quick service restaurants, grocery stores, and retailers.
Finally, the Stifel GMP analyst wrote that once it scales up Payfare could become an acquisition target of either a payroll processing company or a large-cap card payment network with the resources to roll out PAY’s platform globally.
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