Pawn Lending Alternative Pesto Announces New Funding Round
Pesto Mastercard

Pawn Lending Alternative Pesto Announces New Funding Round

A startup that’s looking to disrupt the pawn shop loan market is ready to hit the scene. This week, Pesto announced a new round of funding, while also launching the Pesto Mastercard.

About the funding round:

The FinTech firm Pesto has revealed a fresh round of funding. While the amount of the round was not disclosed in a press release, Crunchbase reports that the Series A amounted to $11 million. Among the firms that invested in the FinTech are Activant Capital, Plural, Sozo Ventures, Commerce Ventures, NJF Capital, Soma Capital, NOMO Ventures, Commerce Ventures, Human Capital, OVO Fund, OEL Ventures, Core Innovation Capital, Great Oaks VC, and Y Combinator. With the funds, Pesto plans to focus on growing its customer base — with a special focus on the cities of Atlanta and Los Angeles.  

Pesto and the Pesto Mastercard:

As mentioned, Pesto was launched to be an alternative to pawn loans. While pawn shops may be thought of as places where consumers can buy and sell random items, many Americans use these shops as a means of getting short-term loans that are backed by their possessions. In turn, Pesto aims to replicate this model digitally and with more affordable interest rates.

The first product from Pesto is the new Pesto Mastercard — issued by Continental Bank. Like pawn loans, Pesto is secured using valuables that customers have (such as precious metals, jewelry, diamonds, gemstones, and watches), with the value of those items representing the card’s credit limit. According to the company’s site, borrowing up to $500 with the card comes with 0% interest and a card fee of $3.33.

To get started, customers can visit the Pesto site to provide details about their valuables and see an estimate of what their credit limit would be. Should they decide to move forward, users can apply for pre-approval and either take their item to a partner location or ship it using a fully-insured prepaid label. Once an inspection is done, a final credit offer will be made. Customers who accept this offer will then receive a digital Pesto Mastercard with their credit limit, while a physical card will arrive soon after.

What they’re saying:

Speaking to the idea for Pesto and its new Pesto Mastcards, the company’s founder and CEO James Savoldelli said of the product, ” It’s a paradigm shift in the credit card market, with the potential to truly democratize credit. Pesto is on a mission to help all Americans find an alternative to high-interest rate loans by providing a straightforward way to secure liquidity and build credit through their assets without having to sell them.”

Meanwhile, Activant Capital partner David Yang said of the firm’s investment in Pesto, “Millions of Americans are defaulting to predatory loans as inflation raises household expenses and banks tighten lending to low FICO customers. We’re excited to back the Pesto team on their mission to fix America’s debt trap pandemic and offer a path to a more secure, credit-backed financial future.”

My thoughts:

As far as FinTechs go, Pesto’s pitch is definitely among the most interesting as of late. Thus, it’s no wonder that the company has gained investor attention. And, while the market that Pesto is targeting may sound relatively small, the truth is that the pawn industry — and specifically the pawn loan industry — are likely much larger than most people realize. To that point, data cited by Pesto shows that U.S. pawn shops generated $9.2 billion in interest revenue in 2019 and that more than 6 million customers rely on the loans these shops offer.

Turning to the Pesto Mastercard product, although it’s a clever product, there are some questions to be answered. For one, looking at the FAQ section on the site, there’s no mention of how consumers can close their accounts and regain possession of their valuables. Also, while those who pay off their purchases on time will not incur interest, there is a $3.33 a month fee as well as 29.99% APR on carried balances. Because of this, even if Pesto may be a better option than a traditional pawn loan, a regular secured credit card is likely a better financial pick. Of course, for those who don’t have the cash to secure a card, perhaps Pesto’s model makes it more attainable.

In any case, it will be fascinating to see how Pesto is received in the market and how the firm might expand in the future.


Kyle Burbank

Head Writer ~ Fioney
Kyle is the head writer for Fioney. He is a personal finance nerd, constantly looking for new apps and services to test and incorporate into his own financial game plan. In addition to his role at Fioney, he's written for other publications including Born2Invest, Lifehack, and Laughing Place, as well as his own site Money@30. He also creates personal finance and travel-related videos for Fioney's YouTube channel, which has garnered more than 2 million views. Currently, Kyle resides in Springfield, Missouri with his wife of 10 years. Together, they enjoy traveling (including visiting Disney Parks around the world), dining, and playing with their dog Rigby.

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