ZayZoon, a Canadian startup promising to take on the payday lending industry through an app that lets workers borrow money and then have it automatically paid back through their paycheques, has won the Fintech Cup and $20,000 at the Payments Panorama conference.
The Calgary-based outfit - which saw off competition from four other finalists to take home the top prize - is the brainchild of 24 year old Tate Hackert, who has been in the lending game since he was 16.
Unlike payday lenders, ZayZoon is only targeting people in work, integrating with payroll firms to gain access to companies and their employees. Users download the app, sign up and borrow funds, which are then automatically deducted from their bank accounts on paydays.
The service is already being piloted through a couple of firms and about 10% of employees have taken up loans. Hackert tells Finextra that through its payroll partner the firm hopes to launch properly by the end of the summer with about 200 companies and several thousand employees.
Despite being in his mid-twenties, the founder, who is working on ZayZoon with two partners, has a long history in the lending game. Between the ages of 16 and 23 he lent around $250,000 of his own money to people on Vancouver Island.
The young entrepreneur advertised on Craigslist and its Canadian counterpart kijiji, with hundreds of people showing interest via email. The most promising leads were picked out and invited to face-to-face meetings, where Hackert says he ran his own, old-school ‘algorithms’, listening to stories and watching body language, to determine risk before extending a loan.
Despite claiming to have experienced defaults of just $3,500 using his distinctly old-fashioned and human approach, Hackert thinks that he can achieve even better results and a wider network with his new data and technology-based enterprise.
Hackert says that the payroll integration means that his firm faces almost no chance of default and can therefore charge just $3 on a $100 loan - way below that seen at traditional payday lenders, which suffer 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 to get access to money they’ve earned when they want or need it.
The payroll integration also means that the firm’s algorithms can crunch the numbers going back months on applicants’ pay details to determine how much to lend. When a user moves to borrow money, the app automatically has an upper limit based on this data.