Our Investment In PayJoy
When I moved to my new home in Bangalore, India in 2005 to help launch Google’s first international product and engineering center, I was astounded at the lack of infrastructure. The electrical grid would fail minutes after the monsoon rains would start, and the sewers would flood with black water bubbling out of the sidewalks. There was also no functional mapping system, which the Google team — and eventually Doug Ricket and Mark Heynen (two members of PayJoy’s founding team) — set out to fix. Today, the quality of Google Maps in India rival maps found in the developed world, and because of investments in infrastructure, the country is accelerating the quality of life for its denizens. Like power, water and maps, credit is another unassailable component of infrastructure.
The developed world runs on credit. It is the lifeblood of our economy and our ability to fluidly trade as both consumers and businesses. But in emerging markets like India, Latin America and Africa, it’s a different story. There are no sustainable credit systems to provide consumers with access to today’s modern financial services, yet emerging markets have some of the fastest growing economies, with over a billion people graduating into the middle class in the next decade. Without access to these financial tools, this growing underserved population will struggle to achieve greater economic stability.
According to the World Bank, 85% of people globally don’t have access to a credit score. Emerging economies in particular have virtually no system to extend credit to individuals, lacking every basic building block of credit including recognition, reputation, and any methods of recourse.
PayJoy sits at the nexus of the ability to solve these problems through software technology on smartphones. PayJoy turns a smartphone into collateral for lending, offering software that enables the end consumer to purchase a smartphone and ultimately build credit. Building positive credit enables the end consumer to purchase items they need now and in the future. And having access to credit is also important in an emergency. If unforeseen expenses arise or consumers need something they cannot afford now, access to credit and being able to borrow can be a lifesaver. Through the infrastructure, networked partnerships, and resulting install base, PayJoy has opened a path for consumers in emerging markets to improve their financial well-being.
Today we are excited to announce Greylock has led the series B in PayJoy and I’m honored to be joining the board. When my colleague Seth Rosenberg and I first met co-founders Doug Ricket and Mark Heynen, we saw the characteristics of entrepreneurs and a startup that we love to back: Doug and Mark’s mission-driven approach to serve the underserved, the depth of the PayJoy technology, the non-obvious network effects, and the insatiable demand from everyone in the ecosystem to provide access to modern financial services.
One of the first and most obvious use cases for PayJoy’s technology is the ability to finance a new smartphone purchase by using it as collateral. Before PayJoy, consumers were required to pay upfront or have strong credit so they could get a loan to pay down the phone over time. If a consumer didn’t meet these requirements, they were stuck with a feature phone and locked out of the modern economy. Now, retailers can use PayJoy to enable consumers to pay-as-you-go for their phone. If a consumer misses a payment, PayJoy’s locking technology kicks-in by restricting functionality beyond basic features like emergency calls until payment is made. Once a consumer pays off their smartphone, they can then use the credit history they’ve built and the remaining value of their smartphone to get an additional cash loan, if needed. For more than one-third of PayJoy’s consumer customers, the PayJoy loan is the first line item in their credit history, which means PayJoy is opening access to the modern financial system for the first time.
In Mexico, PayJoy’s beta market, default rates have been cut in half while approving over 90% of customers in the underbanked segment. This early impact has enabled PayJoy to sign on dozens of phone retailers, financial institutions, carriers, and lenders in some of the largest emerging markets. Partners include Telefonica (Mexico), d.light (Africa), and Adelantos (Panama). PayJoy also works with enterprises like Qualcomm and Samsung to ensure the locking technology can be supported on mobile devices.
When investing in fintech, we look for companies that have three primary characteristics: distribution advantage, software as a core competitive advantage, and reasonable capital intensity. PayJoy exhibits all of these characteristics, and we’re thrilled to have them join Greylock’s portfolio of category-defining fintech companies including Oportun, Coinbase, Blend, Ribbon, and Wealthfront.
At Greylock, we are energized by the role software can play to increase access to financial services globally. Doug has assembled a killer team of engineers and data scientists to turn smartphones into a financial asset. We’re excited and honored to be partners with the PayJoy team as they enter their next phase of global growth.
