My summer internship: helping the underbanked in Africa afford a smartphone and unlock access to finance

First day, at PayJoy’s SF office

The summer finally came to California, but I’m now 10.5k miles or 21+ flight hrs away from Berkeley. I will spend my summer in the winter of Johannesburg in South Africa working with PayJoy, a company focused on technology and financial inclusion.

I’m personally interested in financial inclusion solutions because it is the baseline for any person to progress in life. Living in a cash-only environment with no access to credit is very expensive and risky. I experienced some of this in my childhood when at some point we had to rely on shark-lenders to cover expenses. I later learned more when I volunteered in a program in my home country of Peru that helps small entrepreneurs from the poorest areas of Lima to grow their businesses. Their main limitation was the lack of access to credit.

Seduced by this problem and the huge impact it has, I decided to shift my career from management consulting, which I had been doing for about five years, to FinTech. So, I joined EFL, a company that develops credit risks scores for people with little or no credit history using alternative data. In my two years there, I supported financial institutions mostly in Latin America to serve loans to the underbanked. It was very fulfilling to experience the social enterprise model where the company generates profits by solving a social problem.

While in EFL, I realized I wanted to expand my skills and experience, until that point focused mostly on operations and project management, to include growth strategy and entrepreneurship. Helping a company expand in emerging markets, and learning how to start a social enterprise, especially with a technology-based solution, were my main motivations to pursue business school. Those interests led me to Haas at Berkeley. During my first year at business school, I have explored the intersection of technology and social impact in FinTech. When recruiting time arrived, and I found PayJoy’s internship role description for Africa, I could not believe how much this opportunity perfectly matched to what I was looking for.

PayJoy has developed a technology that allows access to finance for the underbanked, beginning with financing a smartphone. A smartphone is one of those things that most of us take for granted, but in Africa only 28% of the population has one, meaning that 800 million of people rely on basic or featured phones which have none or limited Internet capabilities. We can’t imagine our lives without the Internet, but there are a lot of people around who live like that! Smartphones are expensive. For most people, it is equivalent to buying a first personal computer. The only way to get one is with credit, which most people can’t get. In Sub Saharan Africa 80% do not use formal or semi-formal financial services. If people are unbanked or don’t qualify for a formal credit, they can’t afford a smartphone.

With PayJoy, the price of the smartphone plus a markup is broken down in small installments without any additional interest rate. If the client does not pay, the phone is locked. So instead of charging late fees or higher interest rates that make it harder for the customer to repay, PayJoy locks the phone. With PayJoy’s innovative solution, the lender can finance smartphones to the underbanked controlling the risk of default, the retailer can sell more phones of higher value to more people who now qualify for this type of credit, and the customer can finally afford a high-end phone and build a good credit history.

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First day in Johannesburg, lunch with the Africa team

So here I am, in Johannesburg, feeling excited and challenged for the projects I will be working on. I’m sure it will be a great experience, moreover now that I have met the team: rockstars who are happy to belong to this family and are passionate about the mission of the company. They have given me a warm welcome and have offered me all their support to succeed and get the most of this experience.

Ten weeks left and counting! Can’t wait to write about my main takeaways from this internship.

First weekend: Safari time! at Pilanesberg National Park

PayJoy closes $6M investment round led by Santander and ITOCHU

San Francisco

PayJoy has closed $6M of new investment with strategic partners who will help PayJoy phone financing further expand internationally throughout Latin America, Asia, and Africa.  The investment was led by Santander InnoVentures, the fintech venture capital fund of Santander Group, and ITOCHU Corporation, one of the largest Japanese general trading companies in Asia.  Other strategic partners joined from Brazil, Nigeria, Mexico, China, Vietnam, and Europe.  This investment brings PayJoy’s total equity and debt financing to $30M since its founding in 2015.

Manuel Silva, Head of Investments, Santander InnoVentures said: “Investing in PayJoy shows Santander InnoVentures’s constant search for great teams pushing the boundaries of fintech. It also shows our increasing interest in models that are relevant to emerging markets and the underbanked.”  He added, “PayJoy’s mission is to help the less privileged join the digital economy and climb the economic ladder.  PayJoy rethinks a basic financial service through the lens of innovation, technology, and data, and brings a simple and fair new offering to those who need it the most. We are impressed by PayJoy’s passion and vision and are thrilled to support them in their next chapter.”

PayJoy CEO Doug Ricket was inspired by the challenge facing half of the world’s population who lack access to credit and cannot afford a smartphone.  Ricket reflects on the company’s new partnerships:  “PayJoy’s approach is to partner with the major players in the mobile industry to achieve scale.  These strategic investors have offered to introduce PayJoy through their long-standing deep regional business networks, which I believe will be tremendously beneficial in accelerating our business partnerships and getting millions of customers onto smartphones in 2018.”

About PayJoy

PayJoy, a FinTech startup based in San Francisco with offices in Mexico City, focuses on enabling the purchase of high-end smartphones for underbanked populations.  Currently available in thousands of points of sale throughout the USA and Mexico, PayJoy is able to approve applicants without a formal credit history or banking relationships by leveraging a unique underwriting process.  PayJoy analyzes an applicant’s working mobile number, valid photo ID, and Facebook account, and turns the phone itself into collateral through its proprietary secure locking technology.  

About Santander

Banco Santander is a leading retail and commercial bank, based in Spain, with a meaningful market share in 10 core countries in Europe and the Americas.  Santander is the largest bank in the euro zone by market capitalization and among the top banks on a global basis.  Founded in 1857, Santander had EUR 1.51 trillion in managed funds, 13,000 branches and 194,000 employees at the close of 2015.  In 2015, Santander made attributable profit of EUR 5,966 million, a 3% increase with respect to the previous year.  Santander InnoVentures is a fintech venture capital fund fully-owned by Grupo Santander.  The fund is stage-agnostic and invests both capital and resources in companies globally.  It focuses on start-ups that can increase the value proposition to Santander customers across the Group’s 10 major geographies, while creating value for the companies it invests in.

About ITOCHU Corporation

ITOCHU, based in Japan, is one of the leading general trading companies.  ITOCHU engages in domestic trading, import/export, and overseas trading of various products such as textile, machinery, metals, minerals, energy, chemicals, food, general products, realty, information and communications technology, and finance, as well as business investment in Japan and overseas.  ITOCHU was originally founded in 1858, and has approximately 120 bases in 63 countries.
Learn more at

PayJoy Raises $18M to Bring Mobile Finance to the Next Billion

PayJoy is delighted to announce $18M of new funding to help us bring mobile finance to the next billion.

The raise includes an $8.5M Series A equity investment led by Union Square Ventures, $4M of venture debt from Western Technology Investment, and $5.7 M of private lending capital. Following $4M raised in 2015, this brings PayJoy’s total financing to over $22.5M.

We’re fortunate to welcome four additional VC firms to the PayJoy family:

USV partner John Buttrick will join PayJoy’s board of directors, and new board advisors include Mitch Kitamura, Raj Date, Olawale Ayeni, and Arjan Schutte.

We are excited to use this investment to bring modern financial services to the underbanked, helping them join the digital economy and climb the economic ladder to success. Our unique mobile finance solution allows underserved consumers to afford modern smartphones for the first time. PayJoy leverages the power of mobile to connect the underbanked to the financial services they need most.

General inquiries:


PayJoy founders Mark Heynen (CBO), Doug Ricket (CEO), and Gib Lopez (COO)


Paypal’s John Dukellis discusses PayJoy and the next wave of consumer finance

john dukellispaypal-logo-20141

I spent some time late last week chatting with one of our earliest investors, John Dukellis.  John is a Senior Director at PayPal and leads their next generation wallet offerings.  We are privileged to be one of a few investments he has made, and to have access to his perspective and expertise.  Here is a writeup of our chat.

What’s your background?  What parts are relevant to PayJoy?

I was in venture for five years, part of about 30 deals, a lot of which were focused on fintech.  I have been in payment startups for 8 years, including running a Mastercard spinout, and COO for a company doing youth accounts.  From there I went to PayPal, been there for about two and a half years, managing our next generation wallet team of 35 global product managers.

PayJoy is finding a way to protect your downside risk and finding a way to serve a market that is underserved with better use of data.  It seems very analogous to what Uber is doing for leasing to drivers, as they have controls and good data and they are serving an underserved market.

What inspired you to invest?

The presentation at Village Capital (link) really got to me.  I tend to evaluate based on where I think competitive advantage can win and throw a few hard questions in, and the plan was buttoned up.  Doug [Ricket, PayJoy’s CEO and co-founder] was a Stanford and MIT guy, as was I, so that gives me additional confidence.

 What are the big trends you see going forwards in consumer finance, and how does PayJoy fit in?

Trend 1:  If you’re not using more data, then you’re shooting in the dark and getting cherry picked.  The whole thing [PayJoy is] doing on underwriting, tapping into social media, and finding a way to do that very very cheap — if you’re not doing that you’re running into an adverse selection problem. 

Trend 2: In my travels in Latin America people are used to the installment method, and the underserved segment in the US is likely to get used to that as well.  In Brazil that’s just how people buy, and they’re willing to pay a premium for that.  You even see Apple come in with a rent a phone type plan, but even better is an installment schedule where you own the phone. 

Trend 3:  Particularly on the loan side, how do you incentivize people to the right behavior, which involves asking for the right downpayment?  For me there is a behavioral part to this.  If you’re an Uber driver, you need to drive a certain amount to make your payment, or your car gets shut off.  In this case, its down to the amount you put up front.  PayJoy asks people to put 20% down, and the phone doesn’t work if you don’t pay.  You have to count on consumers to behave the way you want them to behave, not just focus on a loss pool.  That’s where I am seeing consumer finance heading. 

Also, no one has cracked retail yet except for big box appliance stores, where heavy underwriting made sense.  The fact is that electronics is now where people are spending a lot of their money.  Someone has to win this.  You see Apple coming in with their strategy.  PayPal credit has struck some partnerships where they have done a lot of consumer electronics financing successfully.  Electronics are now considered a core utility with a high up front costs.  PayJoy is solving a known problem in a hugely growing area.

Where is the biggest need for PayJoy?

I think it’s in the market where the phone is the computer.  There’s a heavy underserved population that’s looking to help get that purchase done.  By getting that purchase done you’re helping them do a lot more and a lot more cheaply.  Moving from a flip phone or a low end smartphone to a full end smartphone can make their lives significantly better.

How will mobile impact payments and finance?

On the product side, the fact is that mobile is so important that it needs finance.  I think consumers are expecting to do everything on their mobile phone.  Here you are in this situation where all servicing is happening electronically.  Because you’re tied into a phone and you’re servicing through the phone, you’ve cut your admin costs down tremendously.  Admin costs have traditionally been a significant cost of the account, depending on the yield.  That’s a serious competitive advantage that you don’t have to worry about the paper based costs.  Also, the fact you have a direct line into the borrowers on the products they’re using is critical. 

If you would like to have a chat about payments and onboarding the next billion, please don’t hesitate to reach out on

How we buy phones

The way we buy phones is changing.  People in the mobile industry may be aware of these changes, but it is fair to say a lot of people aren’t. That’s because the process of paying for a phone is complex and often intentionally obtuse.

Why care?  The smartphone market is enormous.  Here is our in depth analysis of where we stand today from Asymco data.

mobile market

Here’s a brief rundown of how buying a smartphone works in the US in 2015, as well as some tips and tricks for getting the most bang for your buck.


Getting a phone used to involve complicated contracts, penalties, and a rigid structure that kept people locked-in for years. All of this was done mainly to get people to pay off their phones without realizing how much it was actually costing them.

It used to be the cost of the phone was folded into a two-year service contract. Carriers would subsidize the full cost of the phone, so a buyer could get a $600 iPhone 6 with only a small down payment. But the buyer would still need to pay the subsidy back a little bit each month. That’s why the two-year contract was so important: it ensured that the buyer would pay back the full cost of their phone before they upgraded to a new one.

The problem was that these plans didn’t allow much flexibility. If the buyer wanted to upgrade to a new phone before the end of their contract, they would be charged a large fee.



Eventually the carriers realized that they — and customers — could benefit by switching to a model that gives consumers the flexibility to upgrade more often. They started offering equipment installment plans (EIPs) that separate the purchase of service from the purchase of the device. Now, consumers get to pay for their smartphones over time without committing to a long-term contract. Customers pay for service month-to-month, and can upgrade their phones whenever they want as long as they pay off the full cost of their previous device.

This change is happening fast. T-Mobile was the first to get rid of contracts in 2013. Verizon was the last major carrier to embrace EIPs, and they’ve seen a huge growth in the number of consumers that are choosing them: 58 percent of their phone activations in the third quarter of 2015 were on installment plans compared to only 12 percent in the third quarter of 2014.  Below are more numbers from the past year.


The EIP model is a much better deal for consumers. It’s a more transparent pricing structure; people now know what their phone is really costing them. They can also keep their old phones when they upgrade—a big benefit considering that a certified pre-owned smartphone can be resold for hundreds of dollars.

What’s even more fascinating is that these installment plans are spreading to places like India, where “EMI” plans are now a popular way to buy devices.  Rather than charge an interest rate or markup, the retailers simply withhold discounts for consumer who want to pay monthly.  These plans also required credit checks, so are really for the top 1%.


Consumers can also lease smartphones now. The arrangement is similar to an EIP, except that after a certain number of monthly payments, the customer has to trade in (not keep) the phone.

Carriers like the leasing arrangement because it sets the consumer up for a long-term relationship where they are continually upgrading and trading in their old phone. But for most consumers, it makes more sense to use an EIP through a carrier or PayJoy, where you can pay out your balance at any time and own your device. Or, opt for a hybrid like the Apple upgrade plan, where consumers are eligible to upgrade after 12 payments, but can also make 12 more payments to own their iPhone outright. The main benefit of the leasing arrangement is that you can skip the process of reselling your old phone.

Another option for getting a phone is to use Mobile Virtual Network Operators (MVNOs) such as Tracfone, which sells its phones through Wal-Mart and other retailers. MVNOs buy access to multiple carrier networks at wholesale, so they can play them off each other to get the best price for minutes. MVNOs often use prepaid plans, so there’s no need for a credit check, and there’s a ton of low cost options out there. There’s also no contract or commitment of any sort. MVNOs are a great option if you don’t have credit history and you don’t want to spend a lot.


But what if you’ve got a tight budget, limited credit history, and want to use a high end phone not offered by an MVNO? Unfortunately, the major carriers only offer their EIPs and leases to consumers with good credit, so a lot of Americans are still being excluded from this business model. These people can get prepaid smartphones for cheap, but these tend to be lower-end devices. For the high-end smartphones that cost $600 or so, these consumers can’t qualify for the installment plans or pay that cost upfront.

PayJoy fills this gap by giving people an option to pay over time for premium smartphones regardless of their credit history. Our installment plans give a new option to a large segment of the population that hasn’t yet had convenient access to the best smartphones. Once a consumer pays the phone off, they can keep it, trade it in, or sell it themselves.

The process of buying a phone has become more transparent; now we’re working to make it more accessible to the next billion consumers.

With contribution by Bryan Jinks of Hippo Reads.

Smartphones and the Wealth of Nations

In America it seems like smartphones are ubiquitous. Everywhere you go, people are paying for their coffees, depositing checks, Snapchatting and Instagramming, and scheduling appointments from their phones. In fact, most people, when faced with the choice of choosing to give up their car, their laptop, or their smartphone, would let go of their phone last.

Why? It’s not because they couldn’t live without Instagram. It’s because smartphones have become a utility in our lives, as important to our daily functioning as electricity. That’s why refugees will wait hours for a YouTube video to load on a camp’s overburdened 3G network, if they can’t get WiFi from a volunteer carrying a hotspot in his or her backpack. Internet access from our smartphones is simply something many people can’t live without.

Last week we pointed out how this kind of digital access is still proving elusive to 80 million Americans — more than you would assume.

Globally there are billions of people who don’t have access to internet at all, much less a smartphone. These people are on the wrong side of a swiftly widening digital divide. In 2015, for the first time, more people in the UK identified their smartphone as the “most important device for connecting to the Internet” than did their laptop or desktop (33% vs. 30% and 14%, respectively), and this is heavily weighted to younger, lower income, and thin file segments of the population buying smartphones now (below).

The smartphone is increasingly the main portal to the internet for the middle classes of the developing world, and adoption is running on a fundamentally different trajectory (below from Asymco).

But this does not capture the sheer number of people involved.  The chart below from Asymco provides a better picture (y axis is in millions of users), but is echoed by other studies showing that by 2020 four in every five smartphone connections will be in developing nations.

Those who don’t make the shift to an internet-connected mobile device will increasingly be cut off from from important flows of information. But perhaps more importantly, they are cut off from the most important tool for increasing financial inclusion that the world has ever seen. More than 2 billion people—roughly three-quarters of the world’s poor—do not have access to financial services. Being unbanked is more than an inconvenience: it can hold back economic productivity, disempower women, and discourage preventative health measures. Luckily, the increasing proliferation of smartphones can help.

not just smartphone growth — financial growth

Commercial uses of mobile phones can be surprisingly high in areas with low internet connectivity. One study found that fishermen in southern India reduced risk and boosted profits by sharing information on catch volumes and market prices via mobile phone. Another found that mobile-enabled communication between grain traders in Niger helped improve outcomes during the 2005 food crisis. This obvious value add is driving widespread adoption of smartphones outside of the West.

This trend is even more apparent when it comes to financial services. Studies have shown that the poor in countries like Uganda and Tanzania are much more likely to use mobile payments systems than they are to use bank-aided transfers, Western Union, or other methods. Companies that provide these services in developing nations are expanding rapidly. M-PESA, launched by Kenyan telecom giant Safaricom in 2007 as a system for microloan repayments, was used by two-thirds of Kenya’s adult population in 2013. At the end of 2013, there were 219 mobile money services in 84 countries sprinkled across Africa, Latin America, and Asia.

In the developed world, we often worry that the “digital trail” we leave on the internet will be turned against us. But for the unbanked in developing countries, this digital trail can help prove their creditworthiness in the absence of credit scores.

Widespread dispersal of smartphones could really go even further to serving the unbanked. In the developed world, we often worry that the “digital trail” we leave on the internet will be turned against us. But for the unbanked in developing countries, this digital trail can help prove their creditworthiness in the absence of credit scores. Startups like Lenddo and Affirm are already using social media identity as a proxy for FICO when making loans, while Socure uses similar information for fraud prevention.  This technique could work with poorer, more marginal populations as well. For instance, some researchers have suggested that microfinancial institutions could get a better assessment of potential borrowers’ creditworthiness by studying their internet activity.   So universal smartphone access can have a massive impact on being able to secure and extend credit.

Obstacles to access — and how PayJoy helps

Many hurdles stand in the way of full smartphone penetration. Perhaps the most important one is the simplest: smartphones are expensive. In the U.S., a new iPhone costs more than $650 without a contract. It’s true that cheap Android phones are proliferating in developing markets, many of them for the equivalent of $30 or less. However, these low-end phones don’t seem to be meeting the needs of the average user: the average Android phone purchased today still costs $220. For people without access to credit, this is a high bar.  Realistically, phones will need to be priced fundamentally differently to serve the next billion new users.

In economic terms, smartphones are an inelastic good: the more affordable they become, the more people will buy them. The last five years has seen an explosion of companies exploiting this low-cost trend, including Xiaomi, the so-called “Apple of China,” and India’s homegrown Micromax brand. The only way that more established corporations like Apple or Samsung will be able to compete is if they make their products affordable and approachable to poorer users.

With PayJoy, we can make make that a reality.  We enable any Android phone to become a pay as you go device through our proprietary locking technology.  We don’t require credit bureaus or other paperwork, and offer extremely low interest rates to anyone who is willing to put up a small downpayment, has a government ID, working phone, and Facebook account.

With contribution by Jill E. Merriman and Nathalie Lagerfeld of Hippo Reads.

We should never have to give out our social security number to buy a phone

Today T-Mobile’s CEO John Legere announced that 15 million customer records were breached on an Experian server connected with credit checks for device financing. The WSJ points out that records included names, birthdays, and social security numbers — sufficient detail for any hacker to steal user’s identities.

It may be time to ask whether giving out our social security numbers to buy a device makes sense anymore.

We give this sensitive data to banks to get a mortgage.  Maybe we give it to a car dealership to finance a car.  But these are high value purchases.  Given the increasing pace of identity theft in the US, we should be cautious about sharing this information.  For context, see how identity theft has ballooned since the dawn of the Internet:

In this environment, submitting this data to a complete stranger working hourly for a carrier (or to Apple, for that matter) whenever we buy an installment contract starts starts looking like a risky proposition  This is probably the smallest purchase you have financed.  Probably by an order of magnitude.  And yet most Americans are doing it

But why?  We don’t do this for electricity, even though the electricity companies install expensive equipment at our houses.  We don’t do it when we drop our car off at a garage.  There are countless other cases.

The unfortunate reason is that no other option has been tried.  And in fact, the smartphone is so much more like electricity than a car purchase.  It is a critical utility.

Rather than collateralizing your credit score, opening up prime customers to identity theft, and not allowing subprime customers to pay over time, we at PayJoy are suggesting a fundamentally different model.  We qualify people with a government ID, working phone number, and Facebook account, and simply shut off the device if a payment is not made.  Like electricity.

We look forward to partnering with carriers to help them do the same.