Coatue direct deposits $20M into Pinwheel, a payroll API for neobanks

One of the most strategically important financial relationships for neobanks is becoming the account destination for a user’s paycheck. If you’re a bank and you own that specific relationship, users will increasingly use that account for everything from daily spending to saving (after all, that’s where their money is going). That activity in turn leads to expansive opportunities to upsell users to other financial products and generate the kinds of fees that banks love to make.

It just so happens though that users are often baffled in how to change their direct deposit instructions. To do so, they still have to go into ancient payroll systems, fill out account and routing data, verify that it’s correctly setup and more — all steps that can fluster users who will just give up.

Pinwheel is a “payroll connectivity” API designed to bridge this divide. It helps neobanks and other clients connect into a users’s payroll information system, offering everything from direct-deposit switching to income verification (a hot space these days), and paycheck-linked lending.

It’s proven very popular, particularly in the midst of the pandemic that saw millions switch jobs as well as neobanks reaching stratospheric growth as account holders searched for cheaper and more flexible banking options. The company saw 11x revenue growth last quarter and claims neobank Current and mobile payment service Square Cash as clients.

That early traction has drawn a new round of capital. Michael Gilroy of Coatue led a $20 million Series A round into the company. (Read more...)