Disrupting a skeezy industry
Pocket Benjamins is starting out in the yucky industry of Payday Advance.
Typical APRs run in the 600% range, and while there’s a lot of defaults, they manage to fully recover 66% of the principal and interest. And that’s the lesser evil when compared to the effective 17,000% APR of a typical overdraft fee.
Amazingly, many states have varying regulations on the Payday Advance industry, and researchers at Pew Trusts have come to the conclusion that Payday Advance companies charge the max allowed in every state, and completely disregard the underlying risk when setting fees.
But, as Jeff Bezos said, “Your margin is my opportunity.”
Our hatred for the current incarnation of the industry is the passion that fuels this endeavor. And more than that, the worldwide erasure of the middle class, and the bifurcation of wealth is a big concern. It’s wrong to exploit those who need help the most, and we’re perpetuating an evil cycle, kicking those who are down.
And while there are larger forces at play (as O’Rielly’s What’s the Future of Work? makes me wonder how the large majority of humanity will be employed in 100 years)…
“I’m looking at the ground, and I want to fix the pothole that’s right in front of me before I fall in.” — Linus Torvalds
So here at Pocket Benjamins, we want to eliminate overdrafts and make a more cost-effective alternative to the traditional Payday Advance.
Let’s be clear here, Pocket Benjamins is still expensive money. While a 3-day Pocket Benjamins loan will be 80% cheaper than traditional payday advance, it still comes out to a whopping 365% APR.
But, this is just a starting point. We think that being 80% cheaper is a much lesser evil, and that a 365% APR is plenty sufficient to keep our principal safe while we get a better handle on our underwriting, which will be powered by a data science layer on top of our customer’s transaction histories. This is a huge competitive advantage as our competitors in the Payday Advance space don’t engage in any underwriting at all.
Like Amazon, we plan on leveraging our competitive advantages to create a moat. By unilaterally lowering our fees over and over and over again, we not only maximize good for all of our customers, we make it increasingly difficult for the competition to enter our turf. The solution to the evil of insanely expensive debt is not no debt; the solution is cheaper and cheaper debt.
It’s time for there to be a data-driven, low-cost, volume supplier of financial services to those living paycheck to paycheck. It’s time for there to be an Amazon of financial services to the 68M domestic underbanked.
Payday Advance is just the gatekeeping product to help our customers with international remittance, check cashing, installment loans, auto loans and etc., all of which are insanely expensive to those with poor/ nonexistent credit.
Fixing this yucky industry is our reason for being.
Note: We desperately need lots of word of mouth. Given the insane profits of the payday advance industry, traditional customer acquisition methods in the space like pay-per-click is insanely expensive. We’d much rather grow by word of mouth, and pass our marketing/ advertising budget on to our customers by lowering our prices. Help us. Help the underbanked. Spread the word.