ZayZoon is charging employees $5 to get paid early – TechCrunch

Despite the so-called Great Resignation, wages have not risen as dramatically as some economists had expected. About 41% of workers recently questioned of Willis Towers Watson say they live paycheck to paycheck, while the Bureau of Economic Advisers reports these personal savings rates reached a seven-year low in April — reflecting the dire financial situation many workers find themselves in.

Tate Hackert, the president of Calgary-based ZayZoon, claims inflexible salary plans are a major factor in the injustice. That’s one of the reasons he founded ZayZoon, he says — so workers can access pay when bills are due, rather than on a fixed schedule.

To grow the business, ZayZoon today closed a $12.5 million funding round co-led by Carpe Diem Investments and Alpenglow Capital with participation from InterGen Capital, Prairie Merchant Corporation and several angel investors. The proceeds, combined with a $13 million loan from ATB Financial, bring ZayZoon’s total equity raised to date to $25 million.

“By the age of 16, I was saving every penny I made and providing a family friend with mortgage financing against interest payments,” Hackert told TechCrunch in an email interview. “The same patterns emerged – people with relative [good] Income that required a small amount of capital for a short period of time just to make ends meet… I wanted to create a product that could help employees in their most vulnerable moments, while remaining socially responsible and staying true to my mission, theirs Overall finances improve health.”

ZayZoon’s platform enables small and medium-sized businesses to implement an Earned Wage Access (EWA) program. EWA gives employees access to a portion of their accrued wages before the end of their payroll cycle. Workers still get their entire paycheck at the end of each cycle. However, the advances made will be deducted from the direct deposit account.

ZayZoon self-funds early wage applications to mitigate employer risk. The service is free for businesses to use, but ZayZoon charges workers a $5 fee to choose how much of their wages they want to access (up to $200). Businesses may choose – but are not required – to subsidize the benefit.

Funding requests are paid into employees’ accounts “within minutes,” or employees can sign up for a ZayZoon-branded Visa card, which works like a prepaid debit card. Whether they choose to go the prepaid route or not, workers can link ZayZoon to their bank accounts for insights into spending, in addition to notifications about overdraft and minimum balance fees.

“Employers find that implementing an EWA program requires a tremendous amount of effort, but ZayZoon can fully activate a business in under an hour, with most taking less than a few minutes,” Hackert said. “Over 3,000 companies now offer ZayZoon to their employees… Depending on the industry and employee demographics, it is typical for a company adopting ZayZoon to have 25% to 45% of its workforce accessing ZayZoon regularly.”

ZayZoon claims that franchisees of Sonic, McDonald’s, Domino’s, and Hilton are among its customers.

ZayZoon is of course part of a huge industry with research firm Aite-Novarica Group estimate that EWA providers moved approximately $9.5 billion in salaries in 2020. Indian company Refyne raised $82 million for this in January, while platforms like Branch, DailyPay and Even have secured hundreds of millions of dollars for their EWA services.

But despite VC Cash and Brand endorsements Like Uber, Lyft, and Walmart, EWA is coming under increasing scrutiny from regulators, including the US Consumer Financial Protection Bureau (CFPB) and the California Department of Financial Protection and Innovation. For example, in New Jersey, recently enacted regulations require EWA providers to confirm a client’s earned income before sending them an advance and obtain an employee’s approval before receiving employee information from employers.

Photo credit: ZayZoon

Some consumer groups argue that EWA programs should be classified as loans under the US Truth in Lending Act, which provides protections such as The groups argue that some EWA programs can force users into overdrafts while effectively collecting interest through fees.

A fee of $5 per pay period may not sound like a lot, but it can add up, especially for a low-income worker — and the consequences can be disastrous. Just $100 less in savings may make families more likely to take out predatory loans and forego paying utility bills, a 2020 to learn showed; a estimated One in five families in the US has less than two weeks of liquid savings.

Hackert strives to distance ZayZoon from “predatory” EWA programs and instead position it as a welcome alternative to late bill payments, overdraft fees, and payday loans. Users are not legally required to repay ZayZoon and ZayZoon will not take any action to collect payment, but non-paying users will not be able to access the Service going forward. At the same time, Hackert suggests that ZayZoon can protect company — particularly smaller, independent businesses — from employees who would otherwise steal from the till to make ends meet.

“ZayZoon is special in the competitive landscape because we cater specifically to small and medium-sized businesses,” said Hackert. “ZayZoon has made a special effort to serve the underserved… Financial stress is a major contributor to lost productivity and health problems.”

However, it remains unclear whether EWA programs are net positive for companies. Using Walmart as an example, the retail giant had high hopes of increasing employee retention by giving employees early access to earned wages. Instead, it found that employees used the early pay access service tended to quit faster.

It’s not just companies that might have complaints. Some employees may object to the way ZayZoon shares their personal information. For example, the company has partnered with Prizeout to power ZayZoon Boost, an optional service that pays wages in the form of gas, grocery, and retail gift cards. ZayZoon promotes Boost as a way to earn gift certificates that are worth more than early paychecks. But in its privacy policy, ZayZoon clarifies that users who participate in Boost consent to submitting personal and financial information to Prizeout, including their name, date of birth, gender, and address.

Beyond Boost, ZayZoon reserves the right of use any User data to conduct research, contests, surveys and sweepstakes and to use it for marketing and promotions. Hackert notes that employees can email ZayZoon’s customer support to request that their data be deleted, but there’s no in-app mechanism that makes this easy.

“Companies are interested in ZayZoon because we significantly improve their employees’ well-being, productivity, retention and recruiting efforts,” said Hackert. “ZayZoon is actively looking for collaboration [regulatory] Efforts and supports well-considered regulation, as ambiguity is never good. There are market players who unfortunately exploit this ambiguity at the expense of consumers – by charging high fees, operating in a non-transparent manner and imposing consumer privacy.”

With the proceeds from the equity and debt round, ZayZoon plans to invest in overall product development and market expansion. When asked if ZayZoon would be hiring amid the global economic slowdown, Hackert said yes, saying he aims to increase the headcount from 60 to 85 by the end of the year.

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