Could Payday Lenders' Pain Be FinTech's Gain? Could Payday Lenders' Pain Be FinTech's Gain?

Could Payday Lenders’ Pain Be FinTech’s Gain?

3060563-poster-p-1-as-feds-crack-down-on-payday-lenders-fintech-startups-see-an-opportunityShort-term, high-interest lenders — usually referred to as “payday lenders” — are facing increased scrutiny and regulation as of late. In fact just last month Google announced they would ban ads from such companies. However one of the industry’s harshest critics has been the Consumer Financial Protection Bureau (CFPB) who’s director, Richard Cordray, recently explained, “The very economics of the payday lending business model depend on a substantial percentage of borrowers being unable to repay the loan and borrowing again and again at high-interest rates.” While this despised industry doesn’t seem to be going away so easily (and not without a fight) some FinTech startups now see an opportunity in taking on the payday lenders and righting their wrongs for consumers.

FastCompany recently highlighted an app called Lenny and its founder Joe Bayen to discuss how his startup is taking aim at short-term lenders. “We offer increasing balances based on how a user behaves. Everything is aimed at upward mobility and helping people,” Bayen said. Lenny does this by offering users a line of credit of up to $1,000. Not only will this allow consumers avoid payday loans but will also help them to build credit, since the app has a partnership with FICO. In short Bayen says that payday lenders prey on the poor while Lenny does the opposite.

Like with other FinTech lenders, Lenny is able to offer low-cost loans because of their low overhead — something that payday lenders with brick and mortar locations cannot. This allows them to truly make a difference in people’s lives and, for Bayen, that’s something that’s very personal. “I’ve been there, I know what it is to struggle,” he said, adding that a big goal of Lenny is to educate consumers. Down the line Bayen says he’d also like to add incentives to Lenny that would reward users as they learn about budgeting and building credit.

Bayen isn’t alone in thinking that FinTech can offer a better solution for cash-strapped working-class Americans. Lenny is actually one of 16 finalists for the Financial Solutions Lab — a program that’s a partnership between the Center for Financial Services Innovation and  JPMorgan Chase. This year one of the other apps in contention is eCreditHero, which helps consumers fix credit report errors, while one of the finalists from last year’s program was an app called Even that allows users to standardize their finances even if they have inconsistent income.

Once again the power of FinTech is showing itself as entrepreneurs are coming up with clever ways to help others, while still making a profit for themselves. By outsmarting the payday loan industry it seems possible that they could actually help bring upon its downfall (assuming regulators don’t do that first). Watch for apps like Lenny and others to not only revolutionize this sector but the world of personal finance at large.

The "Email" field is empty, you must enter some text to proceed.The text you entered in the "Email" field appears to be invalid, please edit it and try again
Get the Latest News Delivered to Your Inbox

FedEx Announces Winners of 11th Annual 2023 Small Business Grant Contest

Nearly three months after the entry period ended, FedEx has announced the winners of its 11th annual Small Business Grant Content. This year's event saw more than $300,000 in funds going to a variety of small businesses across the nation. Last month, the company revealed 100 finalists, with that list now being narrowed down to just 10 winners. This year's grand prize winners included KindVR, The Cupcake Collection, Up In...
H-E-B and Central Market  credit cards

Imprint Launches Credit Cards from H-E-B and Central Market 

The FinTech Imprint is partnering with the popular Texas-based grocery chain H-E-B for a pair of new rewards credit cards. This week saw the launch of the H-E-B Visa Signature Credit Card as well as the Central Market Visa Signature Credit Card. With these two (nearly identical) options, customers will be able to earn rewards on groceries and beyond. First, both versions of the card earn up to 5% back on select...
Summer app

Student Loan Benefit FinTech Summer Raises $6 Million

For years, student debt has been one of the most talked about financial topics. What's more, while the debt itself has become a major part of many Americans' lives, discussion of student loans has become political due to efforts to forgive certain loan repayments. However, while we wait for resolution on that front, a FinTech that brings student debt benefit solutions to employers and consumers has raised a new round...
Choice Privileges Select Card

Choice Hotels, Wells Fargo Debut Choice Privileges Select Card

With spring well underway and the summer travel season now just around the corner, Choice Hotels and Wells Fargo have unveiled their latest co-branded credit card offering. Today, the two companies announced the Choice Privileges Select Mastercard. Carrying an annual fee of $95, this card will serve as the premium option in the hotel brand's new lineup. Looking at the Choice Privileges Select, it offers a mix of rewards categories....
Melissa Urban holding a Ness card

Health and Wellness Rewards Card Ness Partners with Whole30

In recent years, several unique rewards cards have come to market. These include offerings from FinTech startups as well as brands looking to do something special for their loyal fans. On that note, a recently-announced rewards credit card offering is now working with a popular brand to introduce new benefits for customers. This week, the Ness Card (which is issued by The Bank of Missouri) unveiled a new partnership with...