Clair is one of the dozens of companies building a business in the evolving earned wage access industry. Early wage access providers extend services that let workers tap their earnings before a regularly scheduled payday. 

Some EWA providers, including Clair, partner with employers, while others offer their services directly to employees. Some of them charge employees fees or interest, while others don’t. Some of Clair’s clients include Viking Ranges and franchisees of DoubleTree by Hilton.

Clair CEO Nico Simko co-founded the New York company in 2020, setting a strategic course for the business that diverges from some competitors. While some rivals earn income from fees and interest they charge workers, Clair derives most revenue from interchange fees on the debit cards it issues to its clients’ workers. Those cards are issued by Clair’s bank partner Pathward and the payments flow over the Mastercard network.

The Consumer Financial Protection Bureau this month issued a rule proposal that calls for some EWA providers to be subject to federal lending laws. States have also sought to impose regulations. In this interview, Simko gives his take on the industry’s regulatory challenges.

Editor’s note: the following interview has been edited for clarity and brevity.

PAYMENTS DIVE: What do you think of the CFPB’s rule proposal and how would it affect Clair?

NICO SIMKO: We built our entire program assuming this would happen. We don't make advances at Clair unless they are complying with lending (laws) and with the rules that the CFPB has implemented in the past. And so for us, the reality is, it's another day in the office. There's not much that changes — it's a little bit anticlimactic.” 

Why is that?

We're not the lender of record. It is a national bank that does this. They have licenses. We acquired licenses in every state to service those loans. We call them ‘loans’ in front of our partners. So, we have been in the camp of ‘these are loans,’ for quite some time now. 

So, the implementation of that rule wouldn’t affect Clair’s interchange revenue streams?

We have developed a product that is more embedded with partners, where we allow those partners to either enable push-to-any card, or a card that they built on their own. In cases that there are fees to consumers for instant transfer, then we're going to have to look at how we disclose those, based on how the final [CFPB] rule will come out.

What types of fees does Clair have?

We have developed new products that are just live this year. So, our revenue-split is now changing. There is some fee revenue that we are generating, but that is still in the early days. Those are instant transfer fees. Those are similar to what you would see if you use Venmo or Cash App to get your money expressed. The Clair fee is usually about $4 or $4.50 for an instant transfer fee, and it's flat.

Clair is a late-comer to the industry. How has that helped the company?

We had the advantage of seeing other programs go live, and then deciding, ‘Hey, there's a great chance that whether it's the CFPB, or some states, someone will come out and say these are lending programs...

We went state by state, and we asked the state about Clair being this technology layer between the bank and the consumer, and whether we required any licenses. Some of the states said, ‘Nope, you're completely fine because the bank is doing this.’ Some have said, ‘You’re a (loan) servicer so you need a loan servicing license.’ Some have said, ‘You're soliciting loans.’ Others have said, ‘You're brokering,’ and so on and so forth. So, we literally did a 50-state analysis, which as you can imagine is a really expensive program. This is why other providers have never done this. 

Do you support any particular state’s approach?

The reality is I support all of them. We've looked at it as ‘I would like regulatory certainty — that is all I care about. The hard part for me is when I have to design a program, and I have to make assumptions on where the rules are going to be two years from now. I would like consistency.

Do you know of any competitors who have done something similar?

A lot of people have told me I am crazy for having done this. I cannot quote who those people are, but the people in the industry have said they were not happy because we showed that there was a path of compliance.

Would you join peers in battling the CFPB rule proposal?

My stance right now is not to battle, it’s ‘Please tell me what the rule is, and I would like to work with it.’ I would understand why other providers would want to battle this. They have leaned hard and strong on the line that this is not a loan, and that puts them into question.

What’s your main takeaway from the CFPB proposal?

The CFPB didn't say, ‘We don't want these products in the market.’