NEW YORK (Reuters) – PayJoy, a startup that has developed smartphone technology to the access to credit in emerging markets, has raised $20 million from venture capital firm Greylock ners, the company said on Thursday.
Union Square Ventures, EchoVC, and the Core of Innovation Capital also participated in the round, PayJoy said. The San Francisco-based startup said it will use the funding to expand, more and more partners, and the development of new technologies.
PayJoy allows consumers with no bank accounts or formal credit history to purchase smartphones on-term payments and cash loans. It does that by turning the smartphone in collateral by software that locks the phone when the payments are not made.
It is of the opinion that making smartphones more affordable can be a stepping stone in the direction of increasing financial integration since financial services are now provided digitally.
“We build the technology to help people cut a path into the financial system,” Mark Heynen, the company’s co-founder and chief business officer, said in an interview.
Worldwide, 1.7 billion adults do not have a bank account, but two-thirds of them own a mobile phone that could assist in the access to financial services, the world bank said in a 2018-report.
Josh McFarland, a partner at Greylock, said that he believes that PayJoy technology and distribution network can help emerging markets to unlock a part of the economic growth.
“Credit is an important piece of the infrastructure that is needed to help the global middle class to better their quality of life,” McFarland said.
PayJoy employs approximately 90 people all over the world, active in more than 10 countries, including Mexico, India, Indonesia, Nigeria, Kenya and Guatemala. In most markets, the startup does not provide the funding itself, but partners with retailers and credit providers. The ners are Telefonica, Vodacom, and Orange SA.
It is launching in six countries through new partnerships with local businesses, Heynen said. These are Mutually in Brazil, Waynimovil in Argentina, MyBucks in South Africa, Panacredito in the Dominican Republic, Omnipagos in Honduras and COINFIN in Colombia.
PayJoy the technology is not underwriting dependency on traditional credit scores, but aims to the increase of consumers willing to pay by making use of their desire to gain access to the phone, which in turn can help to keep default rates in check, Heynen said. He refused to disclose default rates.
“Customers like it because it makes the phone pay-as-you-go,” Heynen said. “In some cases, if they decide that they can’t pay, they can send in the phone and have their contract cancelled.”
Reporting by Anna Irrera; Editing by Leslie Adler