ZayZoon charges employees $5 to get paid early

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Despite the so-called Great Retirement, wages did not rise as sharply as some economists expected. About 41% of workers recently examined Willis Towers Watson say they live paycheck to paycheck, while the Bureau of Economic Advisers reports that personal savings rates reached a seven-year low in April, reflecting the dire financial situation faced by many workers.

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Tate Hackert, CEO of Calgary-based ZayZoon, argues that inflexible pay schedules are the root cause of inequality. That’s one of the reasons he founded ZayZoon, he says, so workers can access pay when bills come in rather than on a fixed schedule.

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

“Saving every penny I made, at the age of 16, I provided mortgage financing to a family friend in exchange for interest,” Hackert told TechCrunch in an email interview. “The same patterns appeared – people with relatively [good] revenues that required little capital for a short period of time just to live on… I aimed to create a product that could help employees in their most vulnerable moments while remaining socially responsible and committed to the mission of improving their overall financial situation. health.”

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The ZayZoon platform allows small and medium-sized businesses to implement what is known as the Earned Wage Access (EWA) program. EWA gives employees access to a portion of their payroll until the end of the payroll cycle. Workers still receive their entire paycheck at the end of each cycle. However, advances made are deducted from the direct deposit account.

ZayZoon funds early wage requests to mitigate employer risk. The company can use the service for free, but ZayZoon charges workers a $5 fee for choosing how much of their salary they would like to receive (up to $200). Companies can choose—but are not required to—subsidize the benefit.

Funding requests are paid “within minutes” to employees’ accounts, or employees can sign up for a ZayZoon-branded Visa card that acts like a prepaid debit card. Whether or not they decide to go the prepaid route, workers can link ZayZoon to their bank accounts for spending information in addition to overdraft alerts and minimum account balance fees.

“Employers assume that implementing an EWA program requires a huge amount of effort, but ZayZoon can fully activate a business in less than 1 hour, and in most cases it takes less than a few minutes,” Hackert said. “Today, more than 3,000 companies offer ZayZoon to their employees… Depending on the industry and employee demographics, for a company that implements ZayZoon, typically 25% to 45% of employees regularly use ZayZoon.”

ZayZoon says its clients include Sonic, McDonald’s, Domino’s and Hilton franchisees.

ZayZoon is definitely part of a huge industry with research firm Aite-Novarica Group. grade that in 2020 EWA providers transferred about $9.5 billion in wages. Indian company Refine raised $82 million for this in January, while platforms like branch offDailyPay and Even received hundreds of millions of dollars for their EWA services.

But despite the venture capital and endorsements from well-known brands Like Uber, Lyft, and Walmart, EWA is under 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, recent regulations require EWA providers to verify a customer’s earned income before sending an advance and obtain employee consent before receiving employee information from employers.


Image credits: ZayZun

Some consumer groups argue that EWA programs should be classified as loans under the U.S. Truth in Lending Act, which provides protections such as requiring lenders to give advance notice before raising certain fees. The groups claim that some EWA programs can force users into overdrafts, effectively charging interest through fees.

Paying $5 for a pay period may not sound like much, but it can add up, especially for a low-income worker, and the consequences can be disastrous. Just $100 less savings could make families more prone to predatory lending and refusing to pay utility bills, one 2020 study showed; en rated one in five households in the US has less than two weeks of liquid savings.

Hackert has gone out of his way to distance ZayZoon from EWA’s predatory programs, instead positioning it as a welcome alternative to late payments, overdraft fees and payday loans. Users are under no legal obligation to refund ZayZoon and ZayZoon will take no action to collect payments, but non-payers will be restricted from accessing the service in the future. At the same time, Hackert suggests that ZayZoon can protect enterprises — especially small independent businesses — from employees who would otherwise steal from the cash register to make ends meet.

“ZayZoon is special in a competitive environment because we specifically cater to small and medium-sized businesses,” said Hackert. “ZayZoon has specifically sought to serve the underprivileged…Financial stress is a major cause of decreased productivity and health problems.”

However, it remains unclear whether EWA programs are a net benefit for companies. Taking Walmart as an example, the retail giant had high hopes for increasing retention by giving employees access to their earned wages ahead of schedule. Instead, it was found that employees using the early payroll access service trying to quit faster.

Dissatisfaction can be not only in business. Some employees may object to how ZayZoon shares their personal information. For example, the company has partnered with Prizeout to launch ZayZoon Boost, a value-added service that pays wages in the form of gasoline, grocery and retail gift cards. ZayZoon touts Boost as a way to earn gift cards that are worth more than early paychecks. But ZayZoon makes it clear in its privacy policy that users who participate in Boost agree to share personal and financial information with Prizeout, including their name, date of birth, gender, and address.

In addition to Boost, ZayZoon reserves the right to use Any user data to conduct research, contests, surveys and sweepstakes and use it for marketing and promotions. Hackert notes that workers can send an email to ZayZoon’s customer support requesting that their data be deleted, but there is no mechanism in the app to make this easier.

“Companies care about ZayZoon because we are significantly improving their employee wellbeing, productivity, retention and hiring efforts,” Hackert said. “ZayZoon is actively seeking to cooperate in [regulatory] efforts and supports thoughtful regulation, as ambiguity is never a good thing. There are market participants who, unfortunately, take advantage of this ambiguity to the detriment of the consumer – they charge high fees, act opaquely and impose data privacy on consumers.

With the proceeds from the equity and debt financing round, ZayZoon plans to invest in overall product development and market expansion. Asked if ZayZoon plans to hire in light of the global economic downturn, Hackert said yes, saying he intends to increase the workforce from 60 to 85 by the end of the year.

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