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Despite the so-called Great Recession, wages have not increased as dramatically as some economists had hoped. The Bureau of Economic Advisers reported that 41% of workers in a recent Willis Towers Watson survey are living paycheck to paycheck, and the personal savings rate hit a seven-year low in April — reflecting the dire financial situation many workers find themselves in. in
Tate Hackert, CEO of Calgary-based Zyzone, asserts that inflexible payment schedules are a major contributor to inequity. That’s one of the reasons he founded ZyZone, he says – so that employees get paid when bills come in, not on a fixed schedule.
To grow the business, Zayzon today closed a $12.5 million funding round led by Carpe Diem Investments and Alpenglow Capital with participation from Intergen Capital, Prairie Merchants Corporation and several angel investors. In addition to a $13 million loan from ATB Financial, the proceeds bring Zizou’s total raised capital to date to $25 million.
“When I was 16, I saved every penny I made and gave it to a family friend to finance the mortgage,” Hackert told TechCrunch in an email interview. “Similar patterns have been observed – relatively people [good] Incomes that require less capital… I wanted to create a product that could help employees in their most vulnerable times, while being socially responsible and realizing the mission of improving their overall finances. health”
The ZayZoon platform allows small and medium businesses to implement a program known as Earnings Access (EWA). EWA gives employees limited access to their accrued wages before the end of their pay cycle. Workers still receive their full pay at the end of each cycle. However, the advances made are deducted directly from the deposit account.
ZayZoon Fund requires an advance payment to reduce the risk on the part of the employer. The service is free for companies to use, but Zyzon charges $5 for employees to choose how much they want to get paid (up to $200). Companies can choose—but don’t have to—to subsidize the benefit.
Invoicing requests are paid to employees’ accounts “within minutes,” or employees can sign up for a ZaZone-branded Visa card that serves as a prepaid debit card. Whether they decide to go the prepaid route or not, employees can connect Zayzon to their bank accounts to get alerts for overdrafts and low account balances in addition to alerts.
“Employers often assume that implementing an EWA program is time-consuming, but Zyzone can be fully operational in less than 1 hour, with most cases taking less than a few minutes,” Hackert said. “More than 3,000 businesses offer Zyzone to their employees today…depending on the industry and employee demographics, it’s typical for businesses that use Zyzone to have 25% to 45% of their workforce access Zyzone on a regular basis.”
Zayzon claims that Sonic, McDonald’s, Domino’s and Hilton franchisees are among its clients.
Zayzon is part of a huge industry, to be sure, with research firm ITE-Novarica Group estimating that UAE suppliers will handle nearly $9.5 billion in payments by 2020. India’s Refin raised $82 million to do just that in January, while platforms like Branch, DailyPay, and even hundreds of millions of dollars for their EWA services.
But despite VC funding and backing from big names like Uber, Lyft and Walmart, EWA is under intense 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 passed laws require EWA providers to verify income before referring clients and to obtain employee consent before obtaining information about workers from employers.
Image Credits: Zayzon
Some consumer groups argue that EWA programs should be classified as loans under the US Truth in Lending Act, which provides protections such as requiring lenders to provide advance warning before adding certain fees. The groups also argue that some EWA programs may force beneficiaries to pay interest on efficiency.
A $5 fee per pay period may not seem like much, but it can add up, especially for a low-income worker—and the consequences can be devastating. A 2020 study found that even $100 less in savings could lead families to continue with predatory lending and skip utility bills. One in five households in the US has less than two weeks worth of liquid savings.
Hackert is hard pressed to distance ZayZoon from “predatory” EWA programs, instead positioning it as a great alternative to late bill payments, overdraft fees, and payday loans. Users are under no legal obligation to pay ZayZoon and ZayZoon will not take action to collect payments, but users who do not pay will be restricted from accessing the Service in the future. At the same time, Hackert suggests that he can protect Zayzo businesses – especially small, independent businesses – from employees who steal money from the cash register.
“ZayZoon is unique in our competitive landscape because we cater specifically to small and medium-sized businesses,” Hackert said. “Zeizon specifically sought services for the underserved… Financial stress is a major contributor to lost productivity and health issues.
It is not clear whether EWA programs are positive for companies. Taking Walmart as an example, the retail giant had high hopes of increasing retention by giving employees early paychecks. Instead, it found that employees who use prepaid services tend to drop out more quickly.
Businesses aren’t the only ones who may have complaints. Some employees may object to the ways in which Zyzo shares their personal information. For example, the company has partnered with Prizeout to run ZayZoon Boost, an alternative service that pays rewards in the form of gas, grocery and retail gift cards. Zayzon promotes Boost to get gift cards worth more than just an advance payment. However, in its privacy policy, Zyzon makes it clear that users who participate in Boost agree to transfer personal and financial information to Prizeout, including their name, date of birth, gender and address.
Beyond promotion, ZayZoon retains the right to use Any User data to conduct research, contests, surveys and sweepstakes and to use for marketing and promotions. Hackert employees can email ZayZoon customer support to request that their data be deleted, but there is no in-app mechanism to make this easy.
“Businesses care about Zyzon because we improve their employee safety, productivity, retention and recruiting efforts,” Hackert said. “ZayZoo is actively looking to collaborate [regulatory] Ambiguity is never a good thing because it supports efforts and well-thought-out regulation. Unfortunately, there are marketers who exploit this ambiguity at the consumer’s expense – charging high fees, operating in opaque ways, and compromising the privacy of consumer information.
With the proceeds from the equity and debt, Zayzon plans to invest in general product development and market expansion. Asked if Zayzon plans to hire in light of the global economic slowdown, Hackert said he aims to increase the headcount from 60 employees to 85 by the end of the year.
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