Transfer Pricing Associates

A facelift for pay day loans

post Wednesday February 6, 2013

David Castillo Dominici

When most people think of a payday loan or a title loan, we imagine a rundown building in the middle of a shopping center with giant neon dollar signs flashing overhead. Contrasting this mental image of a dilapidated building is LendUp, a breakthrough internet start-up in San Francisco that is changing the way Americans view short term and pay day loans. The growing role that data plays in the financial industry is a driving factor into the way that LendUp has changed the platform for pay day lending.

As data gathering has become more widespread and efficient, the application and utilization of data has developed as well. LendUp is a prime example of a company incorporating information from consumers into their business model to gain a competitive advantage in saturated markets, like that of pay day loans. One way that LendUp has incorporated information is if a customer allows LendUp access to their Facebook and other social media outlets, the customer has a greater chance of receiving a loan, depending on the amount of activity on their profile. LendUp believes that if you are more socially connected, you are more likely to be fiscally responsible and pay the loan on, or before the due date for repayment. LendUp uses the information that customers provide and applies complex algorithms that they have created to determine more accurately credit risk. In an industry that typically does not require a credit rating or ignores bad credit, this is a breakthrough that will likely continue paying dividends for this company.

Another advantage of using this data is the speed and ease of lending. LendUp has a unique advantage of allowing customers to request a loan from the comfort of their own home. While applying for a loan through LendUp, customers are able to select the size and payment period of the loan. The flexibility and convenience that is provided by LendUp to customers is helping to separate LendUp from the rest of the pay day loan vendors. The incorporation of data and other breakthrough technologies has allowed LendUp and other financial companies to improve their services and develop business advantages in an industry that faces stiff competition.

Source:Financial Times
Image source: Free Digital Photos

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