Millennials on the income struggle bus, rejoice, because this startup can get you one day closer to payday. Early Salary, a fintech startup, today said it has raised US$1.5 million seed capital led by New Delhi-based Transcorp Group. Early Salary aims to take cash advances and quick loans to mobile phones, developing an app that lets people apply for loans that, if approved, get credited to their accounts instantly.
The seed money will be directed toward getting the startup’s app up and running in the next three months.
The verification process combines traditional credit scoring methods with social and online risk assessment, involving social media and data analytics. Potential borrowers can upload a selfie and fill out a quick application form. Users can pay loans back when they get their salary the following month with a 22 to 30 percent annual percentage rate. It could be great news for app users, because payday loans can get expensive.
"We operate differently from a payday model," says Akshay Mehrotra, co-founder and CEO. "This model replaces the personal loan [or credit card]. We’re targeting people in their first jobs, between the ages of 22 and 26, who are taking out a first-time loan." In turn, the app can help users build credit.
Banks like Citi also offer quick, mobile-based loan services, but the problem with payday loans is that the people who need them are often young or have no credit records, making it hard to get money through banks. Trying to get around these loan restrictions has left people vulnerable to cash advance scams, which can come in the form of elaborate scam rings or simply through one of those annoying ads that makes it through your pop-up filter.
Based in Pune, Early Salary was co-founded by Akshay, Ashish Goyal, and Jay Jain, all of whom have over a decade of experience in their respective fields.
Akshay previously worked for Policy Bazaar, an online insurance portal. He sees payday loans as a basic need among the up-and-coming millennial and middle class populations.
"There have always been times of the month where we are left with empty pockets," he says. "Being broke at the end of the month is a common problem, and EarlySalary plans to help provide a small bridge loan to tide over that short difficult period till your salary reaches your account."
So, millennials, keep your eye on this company. A few months from now, that sinking feeling when you realize you’re short on cash with a week and a half to go might be history.
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