Pay-As-You-Go, from solar kits to smartphones

Can the mobile industry and ecosystem players learn from an industry that has proved its solid technology foundations, high demand and low-income customers’ ability to pay for credit?

Energy poverty is a development challenge that traditional, centralized approaches have been slow to overcome. Globally, 1.1 billion people remain without access to electricity, including 589 million in Sub-Saharan Africa. Alternative energy sources such as solar have existed for decades, but their upfront costs have been unaffordable for most low-income customers, with the vast majority unable to access the credit necessary to extend repayment over time.

The expansion of digital finance systems in the developing world has altered this financial context and enabled new business models that rely on small, regular payments. In the off-grid energy sector a group of solar companies, primarily in East Africa and South Asia, are leveraging digital finance and locking technologies to offer pay-as-you-go (PAYG) energy.

How PAYG solar works

PAYG businesses rely on distributed energy sources where energy is generated at the point of consumption, in the case of PAYG solar, from a photovoltaic panel on the customer’s roof. Products range in size from $150 to $300 small home systems. Customers pay a fixed amount ($25) upfront to receive the product, and then make small, routine payments ($0.40 per day) over time (12 months). PAYG solar units contain hardware that allows the seller to remotely lock or unlock the unit, based on receipt of payment. Once the customer’s prepaid use is completed, the solar device automatically shuts off until the next payment is made. Payment schedules are relatively flexible, allowing households to pace the use of energy according to their cash flow and ability to pay.

From the provider perspective, the ability to remotely activate/deactivate the solar device based on payment significantly reduces the risk of default and theft. This added security allows PAYG providers to offer consumer financing in one of two forms: energy as an asset, where the customer pays off the solar unit over 3–36 months and takes ownership when repayments are complete, or energy as a service, in which the customer signs a long-term lease with lower monthly payments and no intent to own. In this case, assets are upgraded or replaced over time.

PAYG solar success

The model has proved its solid technology foundations, high demand and low-income customers’ ability to pay for clean energy and this can be seen in the strong performance of the PAYG solar market. According to the latest figures announced by GOGLA and The World Bank Group’s Lighting Global program in their first half of 2018 Global Off-Grid Solar Market Report, 3.66 million off-grid solar products were sold globally in the first half of 2018 of which 2.93 million have been sold on a cash basis ($107.50 million value) and 730 000 via PAYG business models ($110.89 million value). The GSMA M4D Utilities estimate that global PAYG solar sales have increased six-fold in the last three years.

Pay-as-you-go for smartphones

The PAYG solar model is also a perfect example of the second wave of inclusive digital innovation impacting lives around the globe. Emerging from the convergence of innovations around the Internet of Things, cloud computing and mobile financial services, these new service delivery models provide flexible payment terms while collecting intelligence on users and the systems they are using, creating a credit history through mobile payments for customers with no formal financial history.

PayJoy gives mobile network operators and finance companies a tool to collateralize smartphones that aren’t just the lowest cost phones. With our patented Lock technology, which resists any efforts to be deleted from the mobile device until the loan is recovered, we can increase payments and minimize the risk of late or defaults. We have developed a user experience on our lock that helps customers to track and make their payments seamlessly via the app. When users are late on a payment, they don’t get charged any late fees. Instead the PayJoy Lock limits their app and call functionalities until they make their payment, and instantly restores normal phone functionalities. Through this new “pay as you go” form of device finance that mirrors the “pay as you go” solar distribution model, we enable users to afford getting a smartphone by using it as collateral, and we enable finance companies and operators to onboard the next billion users to smartphones and full connectivity.

African countries will continue to experience a degree of volatility due to factors such as currency and economic and political instabilities, lack of locally relevant content and technical literacy and affordability. However, innovative technologies and solutions like that of PayJoy can lead to the next African smartphone boom in the longer term. Indeed, market researchers project an increase in the availability of low-cost devices in the region could add a further half a billion smartphone connections by 2020.

However, the time has certainly come to redefine low-cost devices to that of making the purchase price more manageable through financing, an area in which PayJoy is leading the market in Africa and globally.

For more information, visit Join the smartphone financing conversation by visiting the PayJoy blog, Twitter, LinkedIn and Facebook pages.

Written by Dominique Friedl, GM Africa and Jenny Jin, Senior Product Manager

Taking our Mission to the Next Level with Greylock’s Series B Investment

Today we announced that Greylock Partners led a $20M Series B investment round in PayJoy, with participation from our seed investor Core Innovation Capital and our Series A lead Union Square Ventures.  As part of this investment, Josh McFarland will be joining our board.  This brings our total financing in debt and equity to about $70M.

This round represents a significant milestone for us.  When we raised our Series A, we were primarily a finance company approving 90% of underbanked applicants in the US and Mexico for device financing using our software.  We are now primarily an enterprise software company enabling the underbanked to get a phone or get a loan in over a dozen countries and we’re continuing to grow globally.  Many of our partners have increased their approval rates from 10% to 90% and reduced their default rates by 50% using our software.

To provide a sense of this shift, here are the public partners we are working with today:

The impact of our technology is hard to fathom, especially for people in developed markets who use credit like water. But if you look at the World Bank map of access to credit worldwide, you can see the delta between developed and emerging markets.

And beyond the data, we hear stories from partners about how our technology is changing lives, not only for the end consumers but for their staff and contractors as well.  For example, with our partner d.Light, we have been able to offer smartphones to customers deep in rural Kenya using field reps on bikes.  This is working so well that a couple of the reps selling these smartphones have been able to set up a dedicated store. Here they are waving at you through your screen from the Kenyan countryside.

We have grown so quickly — and had such an impact wherever we have grown — because credit is sorely needed virtually everywhere as the middle class expands.  Credit requires assessing ability to pay and ensuring willingness to pay, yet the vast majority of the world’s population does not have a credit score and cannot pledge collateral. Enter the PayJoy Lock — now globally available — which converts smartphones into collateral, ensuring willingness to pay and reducing the burden on lenders to assess ability to pay.  

We enable credit not only through our patented technology but also our partnerships, and with this round we plan to invest in both.  We plan to continue to add compatibility partners like chip makers and OEMs to ensure we are relevant to more end users. We also plan to scale up our partnerships with lenders worldwide, specifically ones that have access to capital, underwriting, developers, and distribution.  We look forward to engaging with players throughout emerging markets via our offices in Mexico City, Jakarta, Singapore, Bangalore, and Johannesburg.

We’re excited to continue unlocking access for the next billion and to share more about our partnerships and product innovations soon.