Zizonthe fintech company that started charging employees a $5 fee to get paid sooner, has raised $34.5 million in a Series B round co-led by Framework, EDC with participation from ATB Financial.
The funds, which will bring ZayZoon’s total raised to $75 million, will go toward “doubling down” on ZayZoon’s growth and accelerating the development of new features in its product roadmap, CEO Dari Tuer says.
“ZayZoon is on a mission to save 10 million employees $10 billion. “We will achieve this through a continued focus on helping employees who are struggling to make ends meet,” Tuer told TechCrunch in an email interview. Meanwhile, SMEs face their own financial challenges as they struggle to recruit talent. ZayZoon helps employers hire and reduce employee turnover while keeping employees away from predatory loans and unnecessary bank fees.
Tuer co-founded Calgary-based ZayZoon with Tate Hackert and Jimmy Ha in 2014. Tuer, a serial entrepreneur, scaled Hackert’s initial proof of concept, and Tuer and Hackert met Ha, an investment banker, at a local startup event. Zizoun participated in it.
Hackert had the idea for the business several years before meeting Tuer and Ha. After making money working at a commercial fishing platform, Hackert – then 16 – loaned money through Craigslist and the Canadian classifieds site Kijiji to help employees fill the gaps between their paychecks.
In the nearly ten years since its founding, Tuer claims ZayZoon has become one of the fastest-growing apps of its kind, acquiring more than 10,000 business customers across the United States and partnering with more than 160 payroll providers.
“ZiZone provides employees with access to their earned wages whenever they need it, rather than having to wait until payday,” Tuer said. “This helps them stay away from payday loans or dealing with unnecessary bank fees.”
ZayZoon falls under the fintech category known as Earned Wage Access (EWA), which works largely on the same premise. For a fee — in ZayZoon’s case, $5 — employees can request a portion of their regular paycheck ahead of time. ZayZoon allows employees to withdraw a minimum of $20 and a maximum of $200 per pay period.
ZayZoon and other EWA companies pitch their products as a way to help customers avoid high-interest loans and credit cards. But the reality is often less rosy than their marketing suggests.
Image credits: Zizon
Some consumer groups say EWA programs, like ZayZoon’s, should be classified as loans under America’s Truth in Lending Act, which provides protections such as requiring lenders to provide advance notice before increasing certain fees. Users are not legally obligated to pay ZayZoon and ZayZoon will not take any action to collect payment. But because ZayZoon makes automatic withdrawals from users’ connected bank accounts, it can still force users into overdrafts while effectively collecting interest through its fees.
ZayZoon offers a no-fee payment option. However, it requires employees to accept payments in the form of gift cards to retail partners such as CVS and Target and to agree to share their personal information, including name, date of birth, gender and address, for advertising purposes. (Workers can email ZayZoon customer support to request that their data be deleted, but there is no in-app mechanism to facilitate this.)
A $5 fee per pay period may not seem like a lot. But it can get worse, especially for a low-income worker — and the consequences can be disastrous. Just $100 less in savings can make households more likely to pursue predatory lending and skip paying utility bills, one 2020 Stady show up. And estimated One in five U.S. families has less than two weeks of liquid savings.
ZayZoon, like its competitors Refyne, Branch, DailyPay and Even, claims to be a retention tool for businesses. But it remains unclear whether EWA programs represent net positive outcomes for companies. Taking Walmart as an example, the retail giant had high hopes of boosting employee retention by giving employees access to earned wages early. Instead, I found that employees were using the early access pay service You tend to quit smoking faster.
EWA use is on the rise, regardless. 2021 a report Research firm Aite-Novarica estimated that workers earned $9.5 billion via EWA applications in 2020, up from $6.3 billion in 2019 and $3.2 billion in 2018.
Due to its popularity among workers – especially those who have… Low credit scores – is growing, and regulators are starting to intervene. In June, Nevada enacted a law requiring early access providers to be audited and inspected by the state. The following month, Missouri passed a law requiring EWAs to register with the state, pay a $1,000 filing fee, and keep payment records for at least two years.
ZayZoon, one of EWA’s largest startups with 102 employees, isn’t letting increased scrutiny get in the way of expansion.
“We are in regular discussions with the institutional investment community and have decided to implement with an opportunistic increase,” Tuer said. “Strengthening our balance sheet will help us solidify Zizon’s position as a leader in its category.”