Payday loans get a bad rap: exorbitant interest rates, bullet-proof glass, cries of predatory lending. However, a team led by a former Google CIO (Douglas Merrill) and a former Capital One Chief Credit Officer is poised to change how the world thinks about the industry.
224: What’s it like to get “TechCrunched?”
Shawn: The reality is that we just launched Wednesday night. So, between the attention from TechCrunch and the fact that we’re making sure the operation is ready, it’s been a busy week.
Editor’s note: See last week’s TechCrunch coverage here.
224: How does traditional payday lending work, and how will ZestCash be different?
Shawn: Most payday loans work rather simply: you get charged $20 in interest for every $100 you need. You write a post-dated check and, when you get paid, you pay back the loan and the interest. However, when someone gets into trouble and can’t pay their loan off in time, they’ll roll it over and pay what they can against the balance.
The traditional payday loan requires that you pay off the balance or roll it over – and, if you have to roll it over, you pay down the interest first. Principal comes afterwards, and that is where the interest can get quite high.
Where we’re different is that, with our loans, we’re letting customers who fall behind pay down on the principal and interest. The result is a loan that is structured in a way that isn’t as onerous.
224: Your storefront for these loans is the Internet. Why?
Shawn: We’re looking to have a connected relationship with customers, but we want to avoid having real estate costs. We’ll still be very connected to customers – our team handles customer interface from start-to-finish, working directly with those who take out loans. We’ll also communicate with customers through phone, email, text messages – but we’re looking to differentiate ourselves from payday loans.
224: Why this industry, and why you and Douglas?
Shawn: Douglas started looking into this industry a couple years back and realized that it is not terribly sophisticated. He also has a passion to do better things for people – and, having been at Google, he knows how machine learning tools can help make this process better for customers.
On the other hand, I’ve been in sub-prime credit for more than 20 years – so I’ve done everything in lending but the IT component – which is where we complement each other nicely.
224: On your timeline, where are you compared to where you’d hope to be?
Shawn: It took us 4 ½ months to get out into the marketplace with the product, which is quite good. Now that we’re in the marketplace, we hope to do a lot of learning over the next couple months.