“Unlocking Financial Access: The Success Story of PayJoy’s $300M Enterprise Empowering the Underserved through Smartphone Collateral Loans”

How PayJoy built a $300M business by letting the underserved use their smartphones as collateral for loansLerato Motloung is a mother of two who works in a supermarket in Johannesburg, South Africa. Then, in February 2024, she saw a sign about PayJoy, a startup that offers lending to the underserved in emerging markets. Motloung is one of millions of customers that San Francisco–based PayJoy has helped since its 2015 inception. And, unlike other startups offering loans to the underserved, it’s doing so in a way that’s not predatory, it says. Last September, PayJoy announced that it had secured $150 million in Series C equity funding and $210 million in debt financing.

Lerato Motloung is a hardworking mother of two who is employed in a supermarket in Johannesburg, South Africa. But in February 2024, she found herself without a mobile phone after it was stolen and she could not afford to buy a new one. For nine months, Motloung had to go without the convenience and connectivity of a smartphone.

Then, a sign caught her eye – a sign about PayJoy, a startup that offers loans to the underserved in emerging markets. With the help of PayJoy, Motloung was able to purchase her first smartphone, becoming one of the millions of customers that the San Francisco-based company has helped since its inception in 2015.

“She was its 10 millionth customer,”

PayJoy’s mission is to provide a “fair and responsible entry point” for individuals in emerging markets to enter the modern financial system, build credit, achieve economic freedom, and access digital connectivity. A public benefit corporation, PayJoy aims to do good while also generating meaningful revenue and running a profitable business. Unlike other startups offering loans to the underserved, the company does so in a non-predatory manner.

Co-founder and CEO Doug Ricket explains,

“We meet customers where they are – even with no bank account or formal credit history, we create access to financial services and carve a path into the financial system.”

PayJoy’s innovative approach involves a “buy now, pay-as-you-go” model for the estimated 3 billion adults globally who don’t have credit. They can purchase a smartphone and pay for it weekly over a 3- to 12-month period, using the phone itself as collateral for the loan.

According to Ricket, the loans are interest-free with no late or hidden fees. However, the company does mark up the price of the phones by a “multiple.” Before signing a contract, customers are presented with the full price upfront.

“Users will never pay more than the disclosed amount and can return their phone and walk away debt-free at any time,” he says.

As of the fourth quarter of 2023, PayJoy had achieved an annualized run rate of over $300 million, up from just $10 million in 2020. The company also achieved “net income profitability” in 2023 and managed to secure significant funding in a challenging fundraising environment. PayJoy raised $150 million in Series C equity funding and $210 million in debt financing, with Warburg Pincus leading the equity raise and Invus, Citi Ventures, Union Square Ventures, and Greylock also participating.

Since TechCrunch first profiled the company in December 2015, when it had raised $4.3 million in equity and debt just 10 months after its inception, PayJoy has come a long way. It now operates in seven countries across Latin America, India, Africa, and the Philippines, providing over $2 billion of credit to date. The company recently launched PayJoy Card in Mexico, which offers a revolving line of credit to customers who have successfully repaid their smartphone loans.

Ricket believes that PayJoy’s use of data science and machine learning to underwrite its loans and assess customers’ creditworthiness enables the company to offer cheaper credit and reduce default rates. He notes that 47% of customers are women, 40% are new to credit, and 37% are first-time smartphone users.

The idea for PayJoy came to Ricket after he served in the Peace Corps and worked as a volunteer teacher in West Africa. His interest in technology in the context of international development grew during his time at Google, where he helped create the world’s first complete digital map. After working for D.Light Design in the pay-as-you-go solar industry in West Africa, Ricket combined all of his experiences to create PayJoy.

With strong momentum in Brazil and new product offerings in development, PayJoy is on track to achieve over 35% revenue growth this year. The company currently has 1,400 employees and has raised more than $400 million in debt and equity since its inception.

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Ava Patel

Ava Patel is a cultural critic and commentator with a focus on literature and the arts. She is known for her thought-provoking essays and reviews, and has a talent for bringing new and diverse voices to the forefront of the cultural conversation.

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