How PayJoy built a $300M business by letting the underserved use their smartphones as collateral for loans

Lerato Motloung is a mother of two and works in a supermarket in Johannesburg, South Africa. After her phone was stolen, Motloung had to go without a cell phone for nine months because she couldn’t afford a new one. Then, in February 2024, she saw a sign about PayJoy, a startup that provides loans to underserved people in emerging markets. She was quickly able to buy her first smartphone.

Motloung is one of millions of customers San Francisco-based PayJoy has helped since its founding in 2015. (She was its 10 millionth customer.) The company’s mission is to “provide an equitable and responsible entry point enabling individuals in emerging markets to access the modern financial system, build credit, achieve economic freedom and access digital connectivity.”

PayJoy became a public benefit corporation last year and is an example of a company trying to do good while generating significant revenue and running a profitable business. And unlike other startups offering loans to the underserved, it does so in a way that isn’t predatory, he claims.

“We meet customers where they are – even without a bank account or formal credit history, we create access to financial services and provide a path into the financial system,” said co-founder and CEO Doug Ricket.

PayJoy applies a buy-now, pay-as-you-go model to the estimated 3 billion adults worldwide who lack credit by allowing them to purchase smartphones and pay weekly for a period of 3 at 12 months. The phones themselves serve as collateral for the loan.

Although the loans are interest-free, with no late or hidden fees, the company marks up the price it charges for the phones by a “multiple,” Ricket said. But it shares the total price up front before customers sign a contract.

“Users will never pay more than the disclosed amount and can return their phone and walk away debt-free at any time,” he says.

As of Q4 2023, PayJoy had achieved an annualized run rate of over $300 million, Ricked told TechCrunch exclusively. This is up from $10 million in 2020, when the country first introduced the loans. And the company posted a “profitable net profit” in 2023. It also managed to raise significant capital in a challenging fundraising environment. Last September, PayJoy announced that it had secured $150 million in Series C equity financing and $210 million in debt financing. Warburg Pincus led its fundraising, which included participation from Invus, Citi Ventures and previous lead investors Union Square Ventures and Greylock.

PayJoy has come a long way since TechCrunch first profiled it in December 2015, when it raised $4.3 million in equity and debt about 10 months after its founding.

Image credits: PayJoy

Today, the company operates in seven countries, including Latin America, India, Africa and, most recently, the Philippines, offering more than $2 billion in credit to date. In October 2023, the company launched the PayJoy card in Mexico, offering customers who have successfully repaid their smartphone loans a revolving credit line. Ricket says PayJoy can “enable cheaper credit and… reduce default rates” by using data science and machine learning to underwrite its loans to assess a customer’s creditworthiness. It says 47% of its customers are women, 40% are new to credit and 37% are new smartphone users.

Ricket was inspired to create PayJoy after serving in the Peace Corps after graduating from MIT. He then spent two years as a volunteer teacher in West Africa, where he became interested in technology in the context of international development. After the Peace Corps, he landed at Google, where he helped create the world’s first comprehensive digital map.

Ricket then returned to West Africa where he worked for D.Light Design in the pay-as-you-go solar industry. All this experience has been combined into PayJoy.

The company is on track to achieve more than 35% revenue growth this year, with strong momentum in Brazil and new product offerings in development, according to Ricket. Currently, the company has 1,400 employees. It has raised over $400 million in debt and equity over its lifespan.

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