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How PayJoy built a $300 million business by letting underserved people use smartphones as collateral for loans

Lerato Motloung is a mother of two who works in a supermarket in Johannesburg, South Africa. Motloung was without a phone for nine months after it was stolen because she couldn’t afford a new one. Then, in February 2024, she saw the logo for PayJoy, a startup that provided loans to underserved groups in emerging markets. She soon purchased her first smartphone.

Motloung is one of the millions of customers San Francisco-based PayJoy has helped since its founding in 2015. (She is its 10 millionth customer.) The company’s mission is to “provide individuals in emerging markets with fair and responsible entry points into the modern financial system, build credit, achieve economic freedom and access digital connectivity.”

Image Source: Alipay

PayJoy became a public benefit corporation last year and is an example of a company trying to do good while generating meaningful revenue and running a profitable business. And, unlike other startups that provide loans to underserved groups, its approach isn’t predatory.

“We meet our customers where they are, creating access to financial services and creating pathways into the financial system even if they don’t have a bank account or formal credit history,” said Co-Founder and CEO Doug Ricket .”

PayJoy is taking a buy-now, pay-as-you-go model to the estimated 3 billion adults around the world without credit, allowing them to purchase a smartphone and make weekly payments over a period of 3 to 12 months. The phone itself is used as collateral for the loan.

While the loans were interest-free and had no late fees or hidden fees, the company did increase the price of the phones “several times,” Rickett said. But it shares the full price up front before the customer signs a contract.

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

Ricked exclusively told TechCrunch that PayJoy’s annualized operating rate has exceeded $300 million by the fourth quarter of 2023. This is an increase from $10 million in 2020 when the loan was first launched. The company became “net profitable” in 2023. It has also successfully raised significant capital in a challenging funding environment. In September last year, PayJoy announced that it had received US$150 million in Series C equity financing and US$210 million in debt financing. Warburg Pincus led the equity round, with participation from Invus, Citi Ventures and previous lead investors Union Square Ventures and Greylock.

PayJoy has come a long way since TechCrunch first profiled it in December 2015, when the company raised $4.3 million in equity and debt about 10 months after its founding.

Image Source: Alipay

Today, the company operates in seven countries across Latin America, India, Africa and most recently the Philippines, and has provided more than $2 billion in credit to date. In October 2023, the company launched PayJoy Card in Mexico, which provides a revolving line of credit to customers who successfully repay their smartphone loans. Ricket said PayJoy can “enable cheaper credit and … reduce default rates” by using data science and machine learning to underwrite loans to assess a customer’s creditworthiness. He said 47% of customers are women, 40% are new to credit and 37% are first-time smartphone users.

Ricket was inspired to found PayJoy after serving in the Peace Corps after graduating from MIT. He then spent two years as a volunteer teacher in West Africa, where he became interested in technology in the context of international development. After leaving the Peace Corps, he joined Google and helped create the world’s first complete digital map.

Ricket then returned to West Africa to work for D.Light Design in the pay-as-you-go solar industry. All these experiences are integrated into PayJoy.

Ricket said that with strong momentum in Brazil and new products under development, the company is expected to achieve revenue growth of more than 35% this year. Currently, the company has 1,400 employees. It has raised more than $400 million in debt and equity over its lifetime.

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