PayPal, the digital payments giant, has announced that it’s made a decision to invest in alternative finance company LendUp.
PayPal Makes Strategic Investment in LendUp
LendUp targets customers that traditional banks decline, offering them access to credit cards, short-term loans without hidden fees, rollovers, and high interest rates
CEO of LendUp, Sasha Orloff, says they are building their own fintech for the purpose of creating new financial products for the “56% of Americans shut out of mainstream banking due to poor credit or income volatility – right on a mobile phone.”
He also commented on PayPal’s decision to invest in LendUp, saying:
“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.”
In addition to having PayPal investing in them, LendUp announced that they have added former LendingClub CFO Carrie Dolan as a board advisor.
Dolan expressed her excitement about being added to the company’s board of directors and also said that she was impressed with LendUp’s “dedication to mission of expanding credit access, lowering the cost of credit and improving financial health for people who need it most.”
LendUp and Alternative Finance
LendUp gives people with poor credit ratings a chance to make small, short-term loans at relatively low-interest rates.
The company is part of a growing trend known as alternative finance, alternative methods of obtaining financial services outside of traditional banks.
Alternative finance comes in a variety of forms with companies utilizing different business models. The range extends from normal payday loan stores — offering short-term and unsecured loans at high-interest rates — to more innovative peer-to-peer lending models, such as Lending Club and SoFi.
P2P lending is a relatively new finance model that typically involves finance companies that operate exclusively online. Just like other P2P models, such as AirBnB and Uber, the company’s main service is just offering a place to match producers with consumers.
While LendUp is not a P2P lending service, it does share some characteristics with the P2P model such as being exclusively internet-based.
What makes LendUp unique, however, is that it targets low-income people as well as people with poor credit, without charging the same high-interest rates they would get with a payday loan.
What do you think of PayPal’s interest in LendUp? Does LendUp have a good business model? Let’s hear your thoughts below.
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