Reinventing payday

When they were university students a decade ago, Avinash Sukhwani and Benoit Menardo used to get pizza delivered regularly. As a result, they got to know one of the delivery drivers well, sharing stories about modern life. Among them was the driver’s frustration about his pay: he could use an app on his smartphone to get paid on demand, rather than when his employer chose to pay him. But the app charged the driver a fee to do so, taken from his pay packet. And it was hard to use.

Fast-forward to early 2020. Sukhwani and Menardo had separately travelled the world and reunited at a digital incubator, learning how to incubate startups. They recalled those conversations with their pizza delivery driver – and realised that technology had advanced so far as to offer true salary-on-demand services for workers without penalising them. So they set to work.

The duo began drawing up a business model in a spreadsheet, to test their belief that the time was right for a salary-on-demand startup that charged commission to employers, rather than employees. It’s a different model to payday loans, which have earned a reputation for punitive interest rates (with salary on demand, there is nothing to pay back, as users can only ever access how much they have earned at the point of withdrawing the funds). 

They thought the economics looked promising, and that Spain would be the right country to launch it in – aided by interviews with would-be users and analysis of data points, such as the size of the average household debt in countries across Europe. “It took us less than six weeks from the day that we decided to start Payflow until we had a working product that was live,” says Sukhwani. The company launched in March 2020.

That speed of development was aided by another spreadsheet – this one containing a checklist of more than a hundred steps that would be required to happen before a real user could make a real transaction. “It was just a matter of working hard, late at night and on weekends – at least at the very beginning of the project – to get it out there,” Sukhwani continues.

On the face of it, Payflow looks simple – enabled by recent developments in open banking and financial transactions. On the front end, the application shows how much money a user has available to withdraw. It also allows the user to declare how much they want to withdraw. But behind the scenes, it’s highly complex. Payflow’s team of developers have spent three years creating integrations with more than 60 different payroll software providers. The app has had to be rebuilt multiple times for integrations with larger clients, while also improving security. It’s also underpinned by a proprietary smart-routing algorithm that allows Payflow to send out money instantaneously. 

But it wasn’t just the technology that was tricky to tackle; payroll is a traditionally conservative, slow-moving part of any business. “When we first started off, it was tricky to convince employers of the value that we had,” says Sukhwani. “They would say things like, ‘Oh, I’ve been paying my employees once a month since the 1980s. Why should I pay them any differently now?’”

The refined pitch deck also helped raise €12 million in funding, including an €8 million round in January 2022. The cash allowed Payflow to expand to about 70 employees, enabling the company to sell its wares to businesses in four different countries. Currently, Payflow has 600 clients, and is on track to reach 1,000 by the end of the year. It has headquarters in Madrid and Barcelona, as well as offices in Lisbon, Bogotá and Lima. Sukhwani believes they can reach the end of 2024 with more than 3,000 customers. 

The growth may seem fast, but it’s also measured. One of the best pieces of advice the co-founders received while they went through the famous Y Combinator incubator was to never save money on lawyers. “That’s the one thing,” says Sukhwani, “that can make your business go bankrupt from one day to the next.”