Payjoy — Unlocking Consumer Finance for the Next Billion
PayJoy is built on a paradox: half of the world’s population (4 billion people) lack access to traditional finance, yet this year they will collectively buy $1 trillion of electronics either using cash or predatory lending. These staggering numbers presented an opportunity.
PayJoy’s innovative technology solution lets them offer fair credit to people with no credit history by programming into the hardware the ability to turn it off when payment has not been made. This allows them to bypass credit scoring and offer real digital access to many for the first time.
How did this solution take shape in the minds of the founders? What does it mean for the future of finance? We spoke to the founders to find out.
The earliest seeds for PayJoy were planted when, Doug Ricket — then an Engineering student at MIT, now the CEO — met international students who got him interested in international development. After college he joined the Peace Corps and worked for two years in the Gambia, West Africa, teaching electrical circuits and C++ programming.
On returning from Africa, he joined Google as an engineer and manager for Google Maps. This is where he met Mark Heynen, now PayJoy’s Co-Founder and Chief Business Officer. Together they ran a project mapping emerging markets in Africa, South America, and Asia, that put every city with over 100,000 people to make the world’s first complete online map (like the human genome project did for the human genome).
Later, a friend from Doug’s high school started a solar company operating in India and China. Doug wanted to help their bring solar kits to Africa, so he and his wife started a company and built wholesale distribution networks for solar throughout Africa.
Doug then joined the solar company to run their engineering department and came up with the innovative insight that is at the core of PayJoy’s solution. Doug developed and patented an idea for “pay-as-you-go solar”: turning $200 solar kits into a $20/ month service, in which the lights turned off if a monthly bill was not paid. They had put great effort into the design and engineering, and adding a financing mechanism really allowed the business to take off. This model is now commonplace and has reached millions of people, largely in East Africa and India.
PayJoy is based on the idea that it is possible to deploy a pay-as-you-go payment model for any essential electronic device built around a microchip: smartphone, laptop, TV, fridge, or dishwasher. They can be programmed to turn off at the end of the month if the bill is unpaid and to turn back on after it has been paid. As simple as it sounds, “hardware-as-a-service” — as they have dubbed it — has yet to be done at scale — and that is PayJoy’s ambition.
Mark, who after the Google Maps experience joined Facebook, came to see how low-end phones had significant limitations and that most developers were not building apps for low-end devices. He partnered with Doug to help get more high-end smartphones into the hands of the next billion. It would be great for OEMs (original equipment manufacturers) who would be able to sell existing devices to a new market and get rid of the credit bottleneck; and carriers would love it because they could increase their average revenue per user through expanded hardware and software offerings.
The low hanging fruit: smartphones in the USA. A quarter of the US population is under-banked, and many have no credit score. As such they have the same problem when they walk into AT&T or Verizon as someone in India, Pakistan or Mexico. They have to pay cash or opt for a lower value prepaid phone.
$15 billion worth of handheld devices are sold via prepaid in the US, out of a $50 billion total handset market. PayJoy has partnered with MetroPCS and Boost, the prepaid carriers of T-Mobile and Sprint to help them grow this market. And beyond the US market, the worldwide smartphone market is $400 billion and growing!
PayJoy opens a new world for their customers. They can now access digital services without relying on debt that is either inaccessible or extremely expensive. The service is designed to be customer-friendly, so as to remove the need to go to predatory lenders. For example, when the phone is “locked”, the user can still receive notifications, but is not able to respond. It is much better for your friends to ask a user to reconnect than to have a collection agency pursuing someone. Payment plans are flexible — when cash is tight, a user can pay for a week rather than a full month. In addition, within PayJoy’s “rent to own plans” customers are never in debt. The service is structured so that any point in time, they can hand back the phone and walk away with no penalty.
PayJoy Chief Operating Officer and Co-Founder Gib Lopez met Doug when they were both MBA students at the Stanford Graduate School of Business. Gib had worked in urban and rural Latin America on projects with the Gates Foundation, TechnoServe, Dalberg, and others. Gib’s professional experience, as well as visits to rural Mexico to see extended family, gave him first-hand experience with the issues of global development, and he joined PayJoy to help execute on the vision of bringing under-served populations into the 21st century with modern, digital, mobile financial services and apps.
PayJoy is currently live in in four states, and recently raised a Series A round to expand to the rest of the US and two international markets. Draper Nexus Ventures — a member of the Draper Network — participated in this round and wrote about it here. According to Doug: “The clear advantage that Draper Nexus brings to PayJoy is its unparalleled access to global investors and partners. This is why we thought they would be great investors for us.” Here at the Draper Venture Network we are excited to become part of their story and look forward to bringing to bear our global resources to help them achieve their mission.