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How PayJoy made $300M by lending to the underprivileged using cellphones as collateral.

Lerato Motloung is a hardworking mother of two, dedicated to her job at a supermarket in Johannesburg, South Africa. Financial constraints forced Motloung to forgo a mobile phone for nine months following her theft. In February 2024, she came across a sign advertising PayJoy, a startup that provides lending services to those in underserved markets. She quickly acquired her first smartphone.

PayJoy, a San Francisco-based company, has assisted numerous customers, including Motloung, since its founding in 2015. She happened to be the 10 millionth customer. The company aims to offer a fair and responsible opportunity for individuals in emerging markets to join the modern financial system, establish credit, attain economic freedom, and access digital connectivity.

PayJoy transformed into a public benefit corporation last year, showcasing their commitment to making a positive impact while also ensuring financial success and running a thriving business. And, in contrast to other startups providing loans to the underserved, it claims to do so in a non-exploitative manner.

“We strive to reach out to customers regardless of their bank account status or credit history, providing them with access to financial services and helping them navigate the financial system,” expressed co-founder and CEO Doug Ricket.

PayJoy is implementing a buy-now, pay-as-you-go approach to cater to the vast number of adults worldwide who lack credit. Their solution enables these individuals to acquire smartphones and make weekly payments over a period of 3 to 12 months. The phones serve as collateral for the loan.

According to Ricket, the company does increase the price it charges for the phones by a certain factor, even though the loans themselves do not have any interest or additional charges. However, it discloses the full price in advance before customers enter into a contract.

“Users will never exceed the disclosed amount and have the option to return their phone and leave without any debt,” he states.

Ricked exclusively informed Eltrys that by the fourth quarter of 2023, PayJoy had reached an annualized run rate surpassing $300 million. When PayJoy first introduced lending in 2020, the amount escalated to $10 million. In 2023, the company achieved profitability in terms of net income. In spite of a difficult fundraising climate, the company was able to successfully secure substantial capital. In September of last year, PayJoy made a significant announcement, revealing that they had successfully raised $150 million in Series C equity funding and an additional $210 million in debt financing. Warburg Pincus took the lead in raising equity, with Invus, Citi Ventures, Union Square Ventures, and Greylock also participating.

Today, the company has expanded its operations to seven countries across various regions, including Latin America, India, Africa, and most recently, the Philippines. To date, it has successfully provided over $2 billion of credit. In October 2023, the company introduced the PayJoy Card in Mexico, offering customers who have successfully paid off their smartphone loans a revolving line of credit. Ricket claims that PayJoy has the ability to improve credit affordability and minimize default rates. PayJoy achieves this by implementing data science and machine learning techniques to evaluate a customer’s creditworthiness during loan underwriting. According to his analysis, nearly half of the customers are women, while a significant portion are new to credit and first-time smartphone users.

His experience in the Peace Corps, which he began after completing his studies at MIT, fueled Ricket’s decision to launch PayJoy. During his time as a volunteer teacher in West Africa, he developed a keen interest in technology and its role in international development. With experience in the Peace Corps, he found his way to Google, where he played a crucial role in developing the world’s first comprehensive digital map.

After that, Ricket returned to West Africa and joined D.Light Design in the pay-as-you-go solar industry. PayJoy has combined all of those experiences.

According to Ricket, the company is poised for impressive revenue growth of over 35% this year. Brazil’s strong momentum and the development of new product offerings contribute to this positive outlook. Currently, the company employs 1,400 individuals. Over its lifetime, it has raised more than $400 million in debt and equity.

Juliet P.
Author: Juliet P.

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