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.
The EWA firm ZayZoon is seeing growth for a payout approach the firm introduced a year ago, where it also offers advance wages in the form of retailer gift cards in North America. Users opting for a gift card will receive a balance that's greater than the amount they put in; for example, CVS currently offers a 7% bonus on top of the advanced wages that are available immediately to users through ZayZoon's Boost mobile wallet with no fee.
By contrast, most EWA providers charge consumers $3 to $5 each time they ask for instant access to earned income ahead of payday, which can add up for users that tap these services frequently. Certain other services are free to the end user or covered by their employer.
ZayZoon's option of a gift card is meant to boost the appeal of using
"BNPL loans and faster payments help people on the edge make ends meet, but these options add complexity to hourly workers' financial lives. A gift card option for necessities could possibly add some stability for users," Hackert said.
ZayZoon, which is based in Canada, reaches end users through 150 U.S.-based payroll providers. The company developed the gift card payout option — which Hackert says is still novel within the EWA industry — by collaborating with New York City-based digital gift-card startup Prizeout, which was founded in 2019 as a payout option for online gaming.
Prizeout recently expanded into about 10 different industry verticals that have added digital gift cards as a payout option, with hundreds of participating merchants, according to Brendan Grove, the company's chief technology officer and co-founder.
Bonuses on Prizeout's platform range from single digits up to 20%, with an average bonus across all merchants of 11% and a high rate of consumer redemption, Grove said. Prizeout generates revenue from fees merchants pay to participate.
ZayZoon, which serves hourly employees at about 4,000 small- to midsize companies, including many franchisees, sees gift cards as a key way to demonstrate financial responsibility and the choices end users have for receiving their pay, Hackert said.
"Around 60% of our users are tapping ZayZoon for short-term necessities — medications, groceries," he said. Walmart, Target, JiffyLube and AutoZone are among gift card providers ZayZoon prominently promotes to EWA users.
ZayZoon users have the option to instantly receive advance wages to their bank account for $5, or instantly at no cost via direct deposit through a push-to-debit Visa debit card ZayZoon offers in conjunction with Pathward (formerly MetaBank). Users can also opt for a gift card to any of ZayZoon's participating merchants.
Most ZayZoon users continue to pay a fee to send advance wages to their core bank account, apparently as a way of managing 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 which day, they tend not to want to change the systems they've set up. But we hope adding a gift card could act as a bridge to payday for necessities without incurring a fee and even getting a bonus on top of the earnings," Hackert said.
The majority of ZayZoon's users tap their wages ahead of payday "multiple times a year," he said.
ZayZoon has seen overall usage of its platform expand four-fold over the last year, and observers expect to see the EWA industry continue to expand if the economy slides further into recession.
But if financial pressure intensifies, the most hard-pressed consumers may find cash to be more useful than gift cards, said Marco Salazar, director of payments at Javelin Strategy & Research.
"The merchant bonus for the end user is a positive for end users, but most of the research we see points to cash as the preferred payout in nearly every case, because it's ultimately the most flexible, which is what people need during harder economic times," Salazar said.
