PayPal has made an investment in an American lending company called LendUp that specialises in giving loans to people with poor credit or who are generally considered as risky borrowers by traditional financial firms.
Founded in 2012, LendUp uses different sources of information and financial data when considering loans to bring lending, as they say, to the millions of Americans in the “emerging middle class.” They have already lent one billion dollars.
LendUp CEO Sasha Orloff says: “We’re building our own technology to create new financial products and experiences for the 56% of Americans shut out of mainstream banking due to poor credit or income volatility – right on a mobile phone. We’re thrilled to count PayPal among our esteemed investors, and look forward to leveraging their insights as we continue to build a multi-product company.”
Two things stand out from this news. Firstly, it’s not just bad credit that makes it tough for people to get a loan or an overdraft or credit. As any self-employed person knows, not having a full-time wage slave status is usually less than ideal when asking for credit. It seems that LendUp realises that. Often such people are a very decent punts for lenders. And as the gig economy burgeons, more individuals fall into the flexible wage position.
Secondly, PayPal has stacks of data and pots of cash. Imagine you’re an eBay seller, casual or professional. If you’ve got years of decent practice and trustworthy conduct via PayPal, then that says a lot about you. It could be used to judge how good a risk you are to a lender.
It seems that PayPal has invested in LendUp so it can better understand the sector and that’s a smart move.