PayPal & LendUp Bridge Financial Inclusion Gap
PayPal put its stamp of approval on fintech startup LendUp, evidenced by a strategic investment by the eBay spinoff in recent weeks. In doing so PayPal demonstrated its commitment to non-prime borrowers, which is the demographic that San Francisco-based LendUp targets.
The pairing brings together the chief executives of two companies – Sasha Orloff and Dan Schulman of LendUp and PayPal, respectively — who have been at the forefront of fintech and who together will likely play an expanded role together.
“People care about the ability to build credit and about having a safe product and a really great user experience. We are aligned with PayPal there. Dan is a pioneer in financial inclusion. He is a ringleader in the industry. There is an exciting momentum from an executive leader with a voice for financial inclusion from one of the largest and most successful fintech companies,” Orloff told deBanked.
PayPal’s mission is similar.
“LendUp and PayPal share a vision of reimagining financial services and offering innovative solutions to people typically underserved by the traditional financial system. PayPal has made a strategic investment in LendUp to help this fintech innovator continue to grow and broaden its positive impact on improving financial health,” according to a PayPal spokesman.
LendUp focuses on the emerging middle class, including those who were left behind in the wake of the financial crisis. Orloff pointed to a macroeconomic shift beginning in 2008 with the creation of Dodd Frank, which is contributing to a deep well of financial exclusion. “More than half of the country has a credit score below 680 and are excluded from many bank products,” Orloff added.
Meanwhile as online lending has taken root banks have demonstrated a stubborn inability to become tech focused
Second Time Around
Orloff and Schulman are no strangers to one another. Previously the LendUp chief was senior vice president at Citi Ventures, Silicon Valley’s maiden venture capital firm for early stage fintech, while the PayPal president and CEO served as group president of enterprise growth at American Express.
“Through the process I met Dan Schulman [then] at American Express. He was a big champion of financial inclusion. He had been tooting the horn at AMEX for a long time and had been leading their financial inclusion revamp,” said Orloff.
While at Amex Schulman was LendUp’s executive sponsor before taking the helm at PayPal. Soon after the teams reconnected and recognized even more possibilities beyond the PayPal ecosystem, such as providing access to credit and helping borrowers to build a credit score. There is also the massive PayPal database to consider.
“PayPal has a bigger reach and a more relevant audience,” said Orloff, declining to tilt his hand to the specific ways in which LendUp and PayPal will partner. “We have a lot of conversations in the works. That is absolutely part of the investment and we are excited,” noted Orloff.
LendUp earlier this year surpassed the $1 billion threshold for loan originations since the company was founded half a decade ago.
“We are a balance sheet lender,” said Orloff. “But we just continue to grow so quickly that we’re going to need to diversify our funding sources over time. We set up structures to do that now, and [investor] Victory Park is an amazing supporter,” said Orloff, pointing out that LendUp just doubled its access to capital with a $100 million credit facility to fund loan growth. “Eventually we will outgrow them as a single funding source. And that will come up soon.”
LendUp’s trifecta of offerings include credit cards, loans and financial education. The education is delivered via online videos and courses that highlight how much bad credit can cost borrowers, evidenced by $250,000 in fees paid by an average consumer with bad credit over their lifetime, according to LendUp stats. LendUp provides tools to help people to improve their credit score, ultimately making it easier and cheaper to borrow money. LendUp has saved its customers nearly $150 million in fees and interest.
Meanwhile LendUp and Beneficial State Bank recently announced an expansion of their credit card, the L Card, which should quadruple the availability of the Visa product.
“We launched the card recently and already by just having a simple and transparent credit card we’ve gotten a top rating in the credit card space,” said Orloff, adding that there is more to come. “We are going to completely revolutionize what credit cards mean for the emerging middle class. We are going to bring innovation that has not happened before. We are almost ready to launch and share that.”
Orloff expects that LendUp will grow in “overwhelming influence” over the course of the next year.
Grameen Bank Effect
For his part, Orloff has always had a penchant for helping the poor, evidenced by his efforts with the Grameen Foundation supporting financial services in rural and under-served areas. His work with the foundation was inspired after reading Nobel Peace Prize winner Dr. Muhammad Yunus’ book Banker to the Poor.
From there he moved on to Citi, where he did credit underwriting before joininig Silicon Valley’s maiden venture capital firm for fintech, Citi Ventures. In 2012 LendUp was born and Orloff has been determined to provide good structured products with embedded education that can help to make people more successful ever since.Last modified: July 25, 2017