Financial Inclusion is Cooperation, not Competition, Silly

We recently announced that PayPal has made a strategic investment into LendUp. It was great to see the positive reaction we received from media, investors and industry insiders alike. I spoke to some reporters about the news, and one asked me a question I didn’t expect: am I worried that the PayPal investment will preclude other financial services companies, who may see PayPal as competitive, from investing in LendUp?

To be completely candid -- I didn’t think twice about it. It absolutely won’t.

First, from a purely competitive perspective, the vision of LendUp doesn’t fit into most companies’ current playbooks. Most specialty finance lenders focus on making a specific product and making it as profitable as possible, rather than on solving a customer challenge. We took the opposite approach. We started with the problem: the 56% of Americans who don’t have access to traditional financial services due to low credit scores or income volatility. Our solution? To create a full product ecosystem, each specifically designed to help consumers access better financial services and build their credit along the way.

In my view, our model isn’t competitive; rather, we’re complementary to any financial institution that wants to work with this consumer segment but may lack the in-house tech and innovation -- product design, underwriting capabilities, embedded financial education, or incentivized graduation -- to do it on their own.

Next, there is a self-perpetuating trend in financial services that reinforces financial exclusion -- and that’s just unhealthy. Fortunately the “good guys” are gaining traction. Dan Schulman, PayPal’s CEO, is a pioneer in financial inclusion. I first met him when he was at American Express, and I remember that even back then he focused on opening up financial access. It wasn’t easy then, and there continues to be resistance among industry players, most often due to inability to innovate in-house. But Dan continues to have a firm conviction that it’s the right thing to do, and eventually the market will catch up.

This type of visionary foresight opens up enormous opportunities. Look at Visa’s investment in Square: through that partnership both companies learned how to open an entirely new customer market. And Square has partnered with many companies in this way across their history. There always needs to be a pioneer.

Finally, the industry is increasingly ready to acknowledge that the systems and structures built to-date don’t work for today’s society. At LendUp, we’re betting heavily that the world will continue to adopt new systems -- and the industry will understand that the financial industry can be both profitable and mission aligned. Frankly, it’s part of the American dream: financial services should help people up, not push them down (“ladders, not chutes” is the first of our 7 values). We believe that the world will catch up with our -- and PayPal’s -- perspective. And when the big banks like Chase and Wells Fargo, or powerful regional banks like SunTrust or Fifth Third Bank, decide they want to make financial inclusion a priority, we will gladly take the call.

So, no, I’m not worried that PayPal’s investment and partnership with us will prevent other financial institutions from wanting to invest. It’s exciting to see big players taking notice, and we think that smart money will be interested in benefiting from our mission and model.

After all, a rising tide lifts all boats: it’s better for Americans and for the financial industry overall if companies step up and contribute to solutions that benefit -- and work for -- everyone.

Note: products and availability differ by state licenses and regulatory capability. We are working on improving both.

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