Companies across the industrial spectrum often rely on migrant workers, and data from the International Labor Organization shows that about 169 million workers travel abroad for employment. But being away from their home jurisdiction and financial infrastructure poses many challenges, including, perhaps the most important part for workers themselves, how best to get paid.
Meanwhile, from the company’s point of view, they may have to manage benefits for workers from different locations, many of whom are in temporary or short-term jobs.
Managing all this administration and ensuring that workers are compensated on time is more difficult than many outsiders might realize. And the problem is that the German startup Kadmos intends to pursue a comprehensive platform that will help employers remove the friction and eliminate many of the costs associated with paying their cross-border workforce.
Just four months after the announcement of $8.5 million seed funding roundKadmos today announced that it has added another €29 million ($29.5 million) to the bank through a Series A tranche led by Blossom Capital with participation from Addition and Atlantic Labs.
Given that migrant workers are by definition away from home for the specific reason of employment, they should also be able to spend what they earn. Sometimes they can get paid in cash, which means they can spend the money on the spot, but then they can face exorbitant transfer fees when it comes to taking the money home with them. On top of that, many migrant workers need to send money home to their family, which is often the main reason they work abroad in the first place – again, they can earn significant cash transaction fees.
Alternatively, a company may choose to pay its employees through intermediaries such as local banks, money transfer companies, agencies, or other third parties, which not only includes many fees, but also significant paperwork and delays.
It’s been just over a year since its inception, and Kadmos is already working with shipping companies that are using an early iteration of their service to pay for their offshore workforce.
How it works
For employers, Kadmos provides centralized payroll platform to make and track payments, no matter where the worker is from.
In terms of how it all works, the employee must of course work for a company that has decided to use Kadmos. The employer connects them through their dashboard, and the employee receives a link to download Kadmos and register.
On the employee sideKadmos provides a mobile e-wallet app that stores workers’ wages in US dollars or euros and allows them to send money home instantly with a predictable set fee. Last but not least, Kadmos also provides workers with their own debit card linked to their digital wallet.
Instinctively, limiting payments in euros or dollars can be a bit restrictive, especially given that migrant workers are likely to come from any number of countries in the world and travel to an equally vast number of countries. However, co-founder Sasha Makarovich noted that the shipping industry mostly pays in these two currencies.
“The current needs of the industry are mainly related to US dollars and euros, since these are the currencies in which the salaries of seafarers are paid,” Makarovich told TechCrunch. “For seafarers, being able to earn wages in ‘hard currency’ (i.e. stable currency) is a significant advantage.”
This, of course, means that workers are likely to have to transfer money frequently when they spend it or send it home. And this is where the Kadmos markup of less than 1% comes into play, which, according to Makarovich, compares favorably with the usual 1.5-4.5% that traditional banks can charge. So if they use their debit card to spend USD/EUR in a country with a different currency, they will be automatically charged at the Kadmos rate.
However, if the company expands into other industries in the future, will Kadmos be able to offer workers the option to be paid in other currencies?
“Yes, we are exploring these possibilities,” Makarovich said.
In essence, Kadmos embodies the modern fintech movement. It has a lot Benefits of a Modern Challenger Bank such as Monzo, in addition to cross-border payment features similar to such as Wise or money transfer platforms such as Remitli. But, according to another co-founder of Kadmos, Justus Schmuser, the main thing in all this is that it is No just another B2B or B2C fintech – it was created to solve a very specific problem.
“The Kadmos approach can be classified as B2B2C,” Schmüser said. “In this sense, our scalability and cost of acquisition is much more efficient, as multiple different employers who use Kadmos to pay their employees can result in thousands of new end users of the Kadmos application.”
Solving two problems at once – helping migrant workers get paid and easing many of the costs and administrative burdens for employers – Kadmos is in a pretty strong position as the world continues to emerge from quarantine and normal business resumes.
“We want to make it easier for companies to pay and at the same time make it easier for workers to get and spend that money,” Schmüser added. “Kadmos has a particular focus on using technology to remove the severe restrictions placed on the financial freedom of employees working abroad.”
Credit: techcrunch.com /