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ZayZoon, which lends employees money for a fee, raises $34.5M

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ZayZoon, a fintech firm that got its start charging employees $5 to get paid sooner, has raised $34.5 million in a Series B round co-led by Framework and EDC with participation from ATB Financial.

CEO Darcy Tuer says that the funds, which bring ZayZoon’s total raised to $53 million, will be put toward “doubling down” on ZayZoon’s growth and accelerating the development of new features on its product roadmap.

“ZayZoon is on a mission to save 10 million employees 10 billion dollars. We will achieve that with a relentless focus on helping employees that are struggling to make ends meet,” Tuer told TechCrunch in an email interview. “At the same time, small- and mid-sized businesses are faced with their own financial challenges while struggling to recruit talent. ZayZoon helps employers recruit and reduce turnover while keeping employees away from predatory loans and unnecessary bank fees.”

Tuer co-founded Calgary-based ZayZoon with Tate Hackert and Jamie Ha in 2014. Tuer, a serial entrepreneur, came on to scale Hackert’s initial proof of concept, and Tuer and Hackert met Ha, an investment banker, at a local startup event that ZayZoon was participating in.

Hackert had the idea for the business several years before meeting Tuer and Ha. After making money working on a commercial fishing rig, Hackert — then 16 years old — lent cash through Craigslist and the Canadian classified ads site Kijiji to help employees bridge the gaps between paychecks.

In the nearly 10 years since its founding, Tuer claims that ZayZoon has become one of the fastest-growing apps of its kind, acquiring more than 10,000 business customers across the U.S. and partnering with more than 160 payroll providers.

“ZayZoon provides employees with access to their earned wages whenever they need them, instead of having to wait until payday,” Tuer said. “This helps them stay away from payday loans or deal with unnecessary bank fees.”

ZayZoon falls into the category of fintechs known as earned wage access (EWA), which largely operate on the same premise. For a fee — in ZayZoon’s case, $5 — employees can request a portion of their regular paycheck early. ZayZoon lets employees withdraw a minimum of $20 and a maximum of $200 each 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.

ZayZoon

Image Credits: ZayZoon

Some consumer groups argue that EWA programs like ZayZoon’s should be classified as loans under the U.S. Truth in Lending Act, which provides protections such as requiring lenders to give advance notice before increasing certain charges. Users aren’t under a legal obligation to repay ZayZoon and ZayZoon won’t take action to collect payments.

ZayZoon offers a no-fee payout option. However, it requires employees to accept payments in the form of gifts cards for retail partners such as CVS and Target and to agree to share their personal information, including their name, date of birth, gender and address, for advertising purposes. (Workers can email ZayZoon’s customer support to request that their data be deleted, but there isn’t an in-app mechanism to make this easy.)

A $5 per-pay-period fee might not sound like very much. But it can add up, especially for a low-income worker — and the consequences can be disastrous. Just $100 fewer in savings can make families more likely to pursue predatory lending and forgo utility bill payments, one 2020 study showed. And an estimated one in five families in the U.S. has less than two weeks of liquid savings.

ZayZoon, like its rivals Refyne, Branch, DailyPay and Even, claim that they’re a retention tool for businesses. But it remains unclear whether EWA programs are a net positive for companies. Taking Walmart as an example, the retail giant had high hopes of boosting retention by giving employees access to earned wages early. Instead, it found that employees using the early wage access service tended to quit faster.

EWA usage is on the rise, regardless. A 2021 report from research firm Aite-Novarica estimated that workers accessed $9.5 billion via EWA apps in 2020, up from $6.3 billion in 2019 and $3.2 billion in 2018.

As their popularity among workers — particularly those with lower credit scores — grows, regulators are beginning to step in. In June, Nevada enacted a law that requires early wage access providers to be audited and examined by the state. The following month, Missouri passed a law that requires EWA companies to register with the state, pay a $1,000 registration fee and retain payment records for a minimum of two years.

ZayZoon, which is one of the larger EWA startups with 102 employees, isn’t letting the increased scrutiny get in the way of expansion.

“We are in regular discussions with the institutional investment community and decided to execute on an opportunistic raise,” Tuer said. “Strengthening our balance sheet will help us cement ZayZoon’s place as a category leader.”



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Five Asteroids In 3 Days! A Barrage Of Space Rocks Are Heading Toward Earth This Week

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Five asteroids of varying sizes are set for a close encounter with Earth in the next two days. NASA’s Center For Near-Earth Object Studies (CNEOS) has revealed that the smallest of them measures between roughly 4.5 to 10 meters in diameter whereas the biggest of them is about 32 to 73 meters.

The data has revealed that the smallest – 2008 LD – will be approximately 29.5 lakh km from Earth at the time of the fly by. It is travelling at a speed more than 16,000 km per hour.

Orbit of asteroid 2024 JV17. Image: NASA

The biggest of the five – the 2024 JV17 – will be approximately 66 lakh km away at the time of the closest approach while travelling at over 30,000 km per hour. Both these space rocks will fly past Earth on May 28.

ALSO SEE: Like Dinosaurs, Humans Will Become Extinct If A Single Asteroid Collides; ‘Asteroid Rush’ Trailer Proves Just That

The other asteroids – the 2021 LV (between 7-15 meters wide) and 2024 JG (between 22-50 meters) will get close to our planet on May 29.

Orbit of asteroid JO16. Image: NASA

There will be a close encounter today as well when the asteroid 2024 JO16 flies past Earth. According to the CNEOS data, it will be about 30 lakh km from our planet and will be travelling at more than 30,000 km per hour.

As the data suggests, there is no need to worry since the asteroids will fly from a safe distance from our planet. Besides, their size except for a few relatively big ones is also not a cause for concern.

ALSO SEE: Lack Of Earth’s Resources Can Be Fulfilled By Asteroids – And A US Firm Wants To Mine Them

(Image: Unsplash)



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Paytm warns of job cuts as losses swell after RBI clampdown

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Indian digital payments platform Paytm warned of job cuts on Wednesday after reporting that its net loss widened in the fourth quarter as it grapples with a recent regulatory clampdown.

One97 Communications, Paytm’s parent, said it expects to cut employee expenses and pare down its annual staff costs by $48 million to $60 million.

The company, once the most valuable Indian startup, reported a net loss of $66.1 million in the fourth quarter ended March 2024, compared to a loss of $20.11 million a year earlier. Revenue declined about 3% to $272.4 million from $280.4 million in the same period.

India’s central bank in February banned the company’s banking partner and sister company, Paytm Payments Bank, from conducting banking activity from March. That brought a sudden halt to Paytm’s slew of banking services, and the company was forced to ink new partnerships with other banks to keep many of those services running.

Paytm said it also took an impairment charge of $27.2 million related to its investment in Paytm Payments Bank in the quarter. In the quarter ending June this year, Paytm projected its revenue to be in the range of $180 million to $192 million.

In the full year ended March, Paytm’s revenue increased 25% to $1.19 billion from a year earlier, though higher payment processing charges, marketing costs, employee benefits charges and software cloud expenses weighed on its bottom line. As a result, net loss widened to $170 million from a loss of $213 million a year earlier.

Paytm’s results include “enough data points to suggest that the business is past the bottom in terms of payment volumes and user/merchant traction,” Bernstein analysts said in a note to clients. “Though from a financial metrics perspective, 1QFY25 is likely to be the bottom, as it would reflect the full impact of the lower steady state (vs. 2 months impact in 4QFY24).”

The analysts, however, cautioned that Paytm’s payment GMV has dropped by about 20% and the company’s expectations for its payment processing margin has also declined, which together “translates to a near 50% blow to the payment margins.” They estimated, however, that Paytm’s merchant lending volumes picked up in March and April — a clear sign of revival.

Paytm had about $1.03 billion in the bank as of March 31. The company’s shares were down about 1% on Wednesday afternoon to ₹349.20, giving it a market cap of $2.64 billion. Paytm went public in 2021 at a valuation of $20 billion.

“I am happy to share that we have successfully transitioned our core payment business from PPBL to other partner banks. This move de-risks our business model and also opens up new opportunities for long-term monetization, given our platform’s strength around customer and merchant engagement,” said Paytm’s founder and CEO, Vijay Shekhar Sharma, in the company’s annual shareholder letter.

“It has been possible in such a short period of time with extensive support from the Regulator, NPCI, Bank partners and our committed team mates. The unwavering commitment of our government and regulator to support innovation and financial inclusion, keeps us true to our mission and committed to our long-term sustainable growth opportunity,” he added.



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Immigrant banking platform Majority secures $20M following 3x revenue growth

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It can be challenging to pick up and move to a new country, made even more challenging if you are not used to the style of banking in that particular country.

The increase of immigrants to the United States — some 50 million total foreign-born people live in the U.S. now, according to immigration think tank Center for Immigration Studies — presents an opportunity for startups to tailor financial services to this population. Companies like Comun, Maza, Alza and Welcome Technologies, for example, help Latino immigrants open bank accounts. 

Magnus Larsson, himself an immigrant from Sweden, ran into similar problems and created Miami-based Majority in 2019 to address them. For a $5.99 per month membership fee, migrants can open a bank account and get a debit card, community discounts, low-cost international money transfers and discounted international calling. There is also a peer-to-peer pay feature.

Accounts don’t require a Social Security number or U.S. documentation, just an international government-issued ID and proof of U.S. residence. They also don’t have overdraft fees or minimum balance requirements. In addition, users have access to Majority’s “Advisor Program,” a network of trained support staff nationwide, who are immigrants themselves.

“For many customers, we are the primary relationship they have when it comes to their financial services, and services to connect back to their own country,” Larsson told TechCrunch. “Most migrants are hit by a lot of predatory fees. When it comes to financial services, remittances and moving money cross-border, you pay a fixed fee, but we are taking away the other fees.”

Magnus Larsson, founder and CEO of Majority.
Image Credits: Majority

Majority’s approach has caught on: Over the past year, the company grew its revenue three times while the number of users doubled. In April, Majority reached $40 million in annual recurring revenue and $200 million monthly in new deposits, Larsson said. Overall, transaction volume grew five times, while remittances grew four times in 2023. Remittances are how someone in the U.S. sends money to someone across boarders, like to family members back home.

TechCrunch has followed Majority’s growth journey since it closed a $19 million seed round in 2021. The company has since gone on to raise a $27 million Series A and several tranches of Series B funding, most recently a $9.75 million round in 2023, which included backing from existing investors Valar Ventures and Heartcore Capital. 

All of that growth led Larsson to consider raising additional funding to help pay for more growth. Of the $20 million in capital raised, $12.5 million is equity, another Series B tranche. The round was led by fintech founders including Klarna co-founder Victor Jacobsson and Swedish serial entrepreneur Hjalmar Winbladh. Valar Ventures, Heartcore Capital and another existing investor Avid Ventures are back to participate, and Zettle co-founders Magnus Nilsson and Jacob de Geer also participated. 

The rest of the money was $7.5 million in debt financing from an unnamed bank. In total, Majority has raised $90 million in equity funding to date. Larsson also declined to give the company’s valuation, but did say it was a flat round.

In addition, the company recently hired Abhi Pabba to serve as chief risk officer. Pabba previously served as Apple’s manager of credit risk for the Apple Card. He will support Majority’s upcoming product expansion efforts. 

With the new funding, Larsson intends to continue developing products, including helping users establish a credit score and gain access to credit products. The company is also building products for redundancies to better manage risk.

The recent funding is also the final step toward profitability, Larsson said.

“That’s always been the aim, and could come as soon as next year,” he said. “We are in that stage where we know our customers well, we know that they love our product and we know how to scale this market very well. What we’re doing is making people thrive and succeed better and faster. It’s something that is needed, and going forward, we are evaluating how we can build this for 300 million people.”



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