Earned wage access programs, which allow employees to access a portion of their paycheck ahead of schedule, are cheaper than payday loans, but often come with fees attached. One provider flips the script by offering users a bonus instead.
Canadian company EWA ZayZoon is seeing growth thanks to a payment approach the company introduced a year ago, in which it also offers up-front salaries in the form of gift cards to retailers in North America. Users who opt for a gift card will receive a balance greater than the amount they deposited; For example, CVS currently offers a 7% bonus on top of advanced salaries that are immediately available to users through ZayZoon’s Boost mobile wallet at no charge.
By contrast, most EWA providers charge consumers $3 to $5 each time they request instant access to pre-payday earnings, which can add up for users who turn to these services frequently. Certain other services are free to the end user or covered by your employer.
ZayZoon’s option of a gift card is meant to increase the appeal of using EWA instead of alternative credit options or buy now/pay loans later, said Tate Hackert, co-founder and president of ZayZoon.
“BNPL loans and faster payments help people on the edge make ends meet, but these options add complexity to the financial lives of hourly workers. A gift card option for needs could possibly add some stability for users,” Hackert said.
Reaching end-users through 150 payroll providers, ZayZoon developed the gift card payment option, which Hackert says continues to be a novelty within the EWA industry, by collaborating with digital gift card startup New York City-based Prizeout, which was founded in 2019 as a payment option for online gaming.
Prizeout recently expanded to about 10 different industry verticals that have added digital gift cards as a payment option, with hundreds of participating merchants, according to Brendan Grove, the company’s chief technology officer and co-founder.
Rebates on Prizeout’s platform range from single digits to 20%, with an average rebate across all merchants of 11% and a high consumer redemption rate, Grove said. Prizeout generates revenue from the fees merchants pay to participate.
ZayZoon, which serves hourly employees at some 4,000 small and medium-sized businesses, including many franchises, sees gift cards as a key way to demonstrate financial responsibility and the options end users have to get paid, Hackert said. .
“About 60% of our users use ZayZoon for short-term needs: medicines, groceries,” he said. Walmart, Target, JiffyLube and AutoZone are among the merchants that ZayZoon promotes prominently to EWA users.
ZayZoon users have the option of receiving wages in advance in their bank account for $5 instantly, or instantly at no cost via direct deposit via a push-to-debit Visa debit card that ZayZoon offers in conjunction with Pathward ( formerly MetaBank). Users can also opt for an instant gift card to any of ZayZoon’s participating merchants.
Most ZayZoon users continue to pay a fee to send salaries in advance to their central bank account, ostensibly as a way to manage complex finances, Hackert said.
“Many of our users live paycheck to paycheck and because they know, to the exact dollar, which bills are due on what day, they tend not to want to change the systems they’ve set up. But we hope adding a gift could act as a bridge to the payday necessities without incurring a fee and even getting a bonus on top of the earnings,” Hackert said.
Most of ZayZoon’s users tap into their salaries before payday “several times a year,” he said.
ZayZoon has seen overall usage of its platform quadruple over the last year, and observers expect to see the EWA industry continue to expand if the economy falls further into recession.
But if financial pressure intensifies, hard-pressed consumers may find cash more useful than gift cards, said Marco Salazar, director of payments at Javelin Strategy & Research.
“The end-user merchant rebate is positive for end-users, but most of the research we see points to cash as the preferred payment in almost all cases, because it is ultimately the most flexible, which is what the people need during tougher economic times,” Salazar said.
