ZayZoon nabs $34.5 million USD in debt and equity to help workers access a cash-advance alternative to payday loans.
Calgary-based FinTech startup ZayZoon has secured $34.5 million USD in debt and equity Series B financing.
ZayZoon, which helps employees at small to medium-sized businesses in the United States (US) access money they have already earned from hours they have already worked but haven’t been paid for yet, plans to invest in “recruiting efforts and continued growth and innovation.”
Framework Venture Partners led the round with co-investment from EDC and participation from ATB Financial and undisclosed existing investors.
The round was led by Toronto’s Framework Venture Partners with co-investment from Export Development Canada and participation from Alberta’s ATB Financial and undisclosed existing investors. ZayZoon did not disclose the amount of debt versus equity. Per Private Capital Journal, it involved $20 million in debt and $14.5 million in Series B preferred share funding. According to TechCrunch, this capital brings ZayZoon’s total funding to about $75 million.
For ZayZoon, this capital comes just over a year after the company closed $22.5 million CAD to fuel the expansion of its earned wage access business across the United States. Approximately half of that financing consisted of equity, while the other half came in the form of a credit facility with ATB Financial.
BetaKit has reached out to ZayZoon for comment.
Founded in 2014, ZayZoon is an earned wage access provider. Earned wage access, also referred to as on-demand pay, enables workers to draw a percentage of the wages they have already earned prior to traditional weekly, bi-weekly, or monthly pay periods, typically for a fee. Earned wage access is marketed as a way to give employees more financial flexibility by providing them with control over when they get paid.
ZayZoon claims on its website that companies using its earned wage access product have typically seen reductions in employee absenteeism and turnover, and a rise in job applicants. The startup’s customers currently include Amazon warehouses, Dunkin’, Burger King, Domino’s, DoubleTree by Hilton, Lids, Mazda, McDonald’s, Panera Bread, and Subway.
RELATED: ZayZoon raises $25.5 million to expand its earned wage access business across the US
While this earned wage access model never caught on in Canada for ZayZoon, as BetaKit previously reported, it has taken off south of the border. Today, ZayZoon only serves the US market.
ZayZoon and other earned wage access providers, which include Toronto-based Payfare, often pitch their products as a means of helping clients avoid predatory high-interest payday loans and credit cards, but as TechCrunch and Vox report, the reality is often less rosy. Although earned wage access is a cash advance, not a loan with interest, the business model has been called “payday loans by another name” because in practice it still involves the consumer paying to receive their paycheque.
Many North Americans live paycheque-to-paycheque and face difficulties making ends meet as inflation rises in both the US and Canada. In this economic environment, ZayZoon claims to have seen more than 400 percent growth in payouts year-over-year. As US businesses in many sectors struggle to hire and retain workers amid low unemployment and labour shortages, ZayZoon sees room for continued growth.
The startup intends to use this capital to offer enhanced resources and features for employees and employers in industries like hospitality, retail, and food services.
Feature image courtesy ZayZoon.
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