ZayZoon, a Canadian startup promising to tackle the payday lending industry through an app that allows workers to borrow money and have it automatically repaid through their paychecks, has won the Fintech Cup and 20,000 $ at the Payments Panorama conference.
The Calgary-based squad – which beat four other finalists to win the top prize – is the brainchild of 24-year-old Tate Hackert, who has been in the loan game since the age of 16.
Unlike payday lenders, ZayZoon only targets working people, integrating with payroll companies to gain access to businesses and their employees. Users download the app, register, and borrow funds, which are then automatically deducted from their bank accounts on paydays.
The service is already being tested in a few companies and around 10% of employees have taken out loans. Hackert told Finextra that, thanks to its payroll partner, the company hopes to get off to a good start by the end of the summer with around 200 companies and several thousand employees.
Despite being in his mid-twenties, the founder, who works on ZayZoon with two partners, has a long history in the loan game. Between the ages of 16 and 23, he loaned approximately $ 250,000 of his own money to residents of Vancouver Island.
The young entrepreneur advertised on Craigslist and his Canadian Kijiji counterpart, with hundreds of people showing interest via email. The most promising leads were selected and invited to face-to-face meetings, where Hackert says he used his own old-fashioned “algorithms”, listening to stories and observing body language, to determine the risk before extending a loan.
Although he claims to have suffered defaults of only $ 3,500 using his distinctly old-fashioned and humane approach, Hackert believes he can achieve even better results and a wider network with his new data-driven and tech-driven business. .
Hackert says the integration of payroll means his business has almost no chance of default, so it can only charge $ 3 on a $ 100 loan – well below that seen with traditional payday lenders, who experience default rates of up to 10%.
ZayZoon argues that in reality, it offers an advance, rather than a loan, helping people with a funding emergency or irregular working hours access the money they have earned when they want or need it. need.
Payroll integration also means that the company’s algorithms can analyze numbers dating back months on applicants’ payroll details to determine how much to lend. When a user decides to borrow money, the app automatically has an upper limit based on this data.