Ex-Google exec founds ZestCash, online lender to the underbanked
ZestCash is a new online lending operation to serve the underbanked launched by a former executive of Google. ZestCash online loans of up to $500 became available in Utah starting Wednesday. The company said it will use data, Google-style, to minimize risk and maximize benefits for its customers.
A new way of online lending
ZestCash was founded by former Google CIO and VP of engineering Douglas Merrill. TechCrunch reports that ZestCash customers get to choose how much money they want to borrow (up to $500) and how long they want to take to pay it back. As customers choose their loan terms, the ZestCash website helps them arrive at a manageable repayment schedule by showing them how the weekly payment is affected by time. Loans are repaid in smaller installments instead of all at once. When a customers take out a loan online, a full payment schedule showing when each payment will drawn from their accounts is provided. ZestCash also pledges to be flexible with individual borrowers about late payments.
ZestCash is entering a huge and growing market. According to the Center for Responsible Lending, about 12 million people take out payday loans each year. The payday loan industry lent about $20 billion last year. According to the FDIC, about 18 percent of U.S. households — 60 million people, are underbanked, meaning they don’t have established relationships that will allow them to borrow from a bank. Merrill told Reuters that ZestCash will use “Google-style data” to help customers only take out loans they can afford. He claims that applying technology learned at Google to loan underwriting will bring the benefits of decent credit to millions of people who never had it before.
Better loans through data crunching
Payday loan companies determine their fees based on the risk involved with limited credit checks. Quentin Hardy at Forbes said that ZestCash will analyze risk in a “Google-like data crunching way” that is new to the online lending industry. Merrill told Hardy that ZestCash lending decisions will be based on “research in economics, math and computer science.” Data will be gathered through phone calls, customer questionnaires and information scraped from the web by ZestCash engineers. In true Google fashion, Merrill said “we believe all data is useful credit data.”