Until recently, Javier, a 60-year-old line cook, couldn’t afford a smartphone.
Now, thanks to a Silicon Valley company, Javier has a Galaxy S8, one of Samsung’s high-end smartphones. Javier said he relies on it for everything.
Once a month, he walks into a mobile phone store near San Francisco and makes a cash payment. If he didn’t, the phone would be remotely locked. No YouTube, no Skype calls, no Facebook. He has never missed a payment.
WATCH: Pay-As-You-Go Smartphone Gives the Poor Access to Better Technology
Smartphones out of many people’s reach
Around the world, people rely more and more on their smartphones for connecting to the internet, and yet for many, the device is still cost prohibitive. For the roughly 1 in 10 American consumers without financial identities — no banking history or credit scores — it is difficult to get smartphones on one of the low-cost payment plans offered by the major carriers.
Javier, who declined to give his last name because he is an undocumented immigrant, is on his third phone from PayJoy, a company founded by former Google employees. PayJoy offers a pay-as-you-go model for the smartphone market aimed particularly at customers with little or bad credit histories.
“We work with immigrants from all over the world coming to the U.S., and we work with Americans who are just outside the financial system,” said Doug Ricket, PayJoy’s chief executive, who worked in the pay-as-you-go solar industry in Africa. “They can afford $10 a week, and they can get a great smartphone. And for PayJoy, we say, ‘Welcome to the 21st century and get all the modern apps.’”
A new way to figure out a person’s credit risk
PayJoy figures out a person’s risk differently than most companies. A customer provides a Facebook profile, a phone number and some sort of official government ID. PayJoy decides the person’s risk level before offering him or her credit for a phone. Then, a customer picks a payment plan and makes a down payment. PayJoy’s research has found that a Facebook profile can be useful in establishing a person’s identity.
“We’re starting from this pool of people who have no traditional credit score and we’re saying for most of them, we can actually find something that the credit agencies are not finding,” Ricket said.
No payment means no YouTube
If a customer doesn’t pay by 5 p.m. the day payment is due, PayJoy remotely locks the phone. A customer can only make emergency calls or call PayJoy’s customer service. The customer can see that friends are texting or messaging on Facebook, but cannot open the phone to read the messages.
“Now, when we look internationally, we see more people going from a flip phone to smartphones, and people upgrading from a really basic level to one that can handle Facebook, maps and Instagram,” Ricket said.
If customers stop paying, they can return the phone without penalty. But if they do pay off the phone, they can qualify for an even better one. PayJoy makes its money by charging monthly interest — as high as 50 percent in some cases — on the retail price of the phone.
Expanding into Africa, Asia and India
The company is operating in the United States and Mexico and has plans to expand into Kenya, Tanzania, southeast Asia and India. So far, PayJoy offers only smartphones running Android, the operating system created by Google, but Ricket hopes to offer iPhones one day.
PayJoy’s vision is to be not just a smartphone firm, but a financing company, offering customers a way to use their phones as collateral to pay off televisions and other household goods.
“Once the customer gets the smartphone, they can potentially use that smartphone either by buying the smartphone with PayJoy or just collateralize an existing smartphone to finance a TV or a sofa,” Ricket said.
If PayJoy takes off, people in emerging markets may be able to upgrade their phone choices, and have a new way to finance their purchases.