Despite the so-called Great Resignation, wages have not risen as dramatically as some economists had predicted. About 41% of workers recently interrogates by Willis Towers Watson say they live paycheck to paycheck, while Bureau of Economic Advisers reports personal savings rates achieved a seven-year low in April – reflecting the dire financial situation many workers find themselves in.
Tate Hackert, the president of Calgary-based ZayZoon, says inflexible pay schedules are a major contributor to inequity. That’s one of the reasons he founded ZayZoon, he says — so workers can access payment when bills come due rather than on a set 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. . Along with a $13 million loan from ATB Financial, the proceeds bring ZayZoon’s total equity raised to date to $25 million.
“Saving every penny I earned, when I was 16, I provided mortgage financing to a family friend in exchange for interest payments,” Hackert told TechCrunch in an interview by E-mail. “The same patterns emerged – people with relatively [good] incomes that needed a small capital for a small period of time just to get by… I sought to create a product that could help employees in their most vulnerable moments, while remaining socially responsible and true to a mission of improving their overall financial health.”
ZayZoon’s platform allows small and medium-sized businesses to implement what is known as an Earned Wage Access (EWA) program. EWA allows employees to access a portion of their accrued salary before the end of their pay cycle. Workers always receive their full salary at the end of each cycle. However, the advances made are subtracted from the direct deposit account.
ZayZoon self-funds advance wage demands to mitigate risk on the employer’s side. The service is free for businesses, but ZayZoon charges workers a $5 fee to choose how much of their salary they want to access (up to $200). Companies can choose – but are not required – to subsidize the benefit.
Funding applications are disbursed “in minutes” to employee accounts, or workers can sign up for a ZayZoon-branded Visa card that acts as 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 takes immense effort, but ZayZoon can fully activate a business in less than an hour, with the majority taking less than a few minutes,” Hackert said. “Over 3,000 companies offer ZayZoon to their workforce today…Depending on industry and employee demographics, it’s typical for a company that deploys ZayZoon that 25% to 45% of its workforce regularly accesses ZayZoon .”
ZayZoon says franchisees Sonic, McDonald’s, Domino’s and Hilton are among its customers.
ZayZoon is part of a massive industry, of course, with research company Aite-Novarica Group Estimate that EWA vendors moved about $9.5 billion in salary in 2020. India’s Refyne raised $82 million to do so in January, while platforms like Branch, DailyPay and Even secured hundreds of million dollars for their EWA services.
But despite the venture capital money and big brand mentions Like Uber, Lyft, and Walmart, EWA comes under increased scrutiny from regulators, including the U.S. Consumer Financial Protection Bureau (CFPB) and the California Department of Financial Protection and Innovation. For example, in New Jersey, recently enacted rules require EWA providers to confirm a client’s earned income before sending them an advance and obtain employee consent before obtaining worker information. with employers.
Some consumer groups argue that EWA programs should be classified as loans under the U.S. Truth in Lending Act, which includes protections such as requiring lenders to give notice before raising certain fees. The groups argue that some EWA programs can force users into overdraft while charging interest through fees.
A fee of $5 per pay period may not seem like much, but it can add up, especially for a low-income worker, and the consequences can be disastrous. Just $100 less in savings can make families more likely to pursue predatory lending and forgo utility bill payments, a 2020 study show; a valued one in five families in the United States has less than two weeks of liquid savings.
Hackert is working to steer ZayZoon away from “predatory” EWA programs, positioning it instead as a welcome alternative to late bill payments, overdraft fees, and payday loans. Users are not legally obligated to repay ZayZoon and ZayZoon will not take any action to collect payments, but non-paying users will be restricted from accessing the service in the future. At the same time, Hackert suggests that ZayZoon can protect companies – especially small independent businesses – employees who would otherwise steal from the cash register to make ends meet.
“ZayZoon is special in the competitive landscape because we specifically cater to small and medium-sized businesses,” Hackert said. “ZayZoon has specifically sought to serve the underserved…Financial stress is a major contributor to lost productivity and health issues.”
However, it is unclear whether EWA programs are a net positive for business. Using Walmart as an example, the retail giant had high hopes of boosting retention by giving employees early access to earned wages. Instead, it found that employees using the Early Salary Access service tend to quit faster.
Beyond 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 email ZayZoon customer support to request deletion of their data, but there is no in-app mechanism to facilitate this task.
“Companies care about ZayZoon because we dramatically improve their employee well-being, productivity, retention, and recruitment efforts,” Hackert said. “ZayZoon is actively seeking to collaborate on [regulatory] efforts and supports well-considered regulation, because ambiguity is never a good thing. There are market entrants who unfortunately take advantage of this ambiguity at the expense of the consumer – by charging high fees, operating in a non-transparent manner and enforcing the confidentiality of a consumer’s data.
With proceeds from the seed round and debt, ZayZoon plans to invest in general product development and market expansion. Asked if ZayZoon plans to hire in light of the global economic downturn, Hackert said yes, saying he aims to grow the workforce from 60 employees to 85 by the end of the year. the year.