A Mobile Payment App Rewards Subprime Borrowers and Improves Performance
Editors note: It’s not every day we find an app that offers real value for the end-user as well as the vendor, but PaySwag has a unique approach that really makes sense. I have to admit, that when I first got on the phone with the company, it took me a good twenty minutes to get my arms around what they are doing. But after talking with them, I got it, and it’s very progressive. This is a little off the beaten track for The Point of Sale News, but read on, because there is value in this huge, underserved and “under-banked” niche.
PaySwag is a mobile app (white-labeled), that brings a revolutionary approach to the payment experience for sub-prime borrowers and the under-banked, through it’s cash or card payment, reward, education and feedback engines. (In addition to variety of state of the art payment options, PaySwag delivers a revolutionary model of rewarding—rather than punishing—those who live paycheck to paycheck.)
Under-banked is a term that refers to the roughly 100 million people in the US that do not have, or do not use a bank account. (Forbes Mag)
Reasons for not using a bank account often include an inability to manage the account without incurring fees or crushing bank penalties – like the $35 overdraft fee that compounds every 3 days at my local bank (the one where they notify you by mail every 10 days, allowing the charges to build up even faster than a loanshark). Suffice to say, it is a market with enormous potential.
Actual case study
Car Loans Inc is an alternative auto financing option for subprime borrowers. Committed to finding a more positive, caring and engaging way to connect with their borrowers, Car Loans Inc piloted the deployment of PaySwag.
Through PaySwag, Car Loans Inc was able to reward borrowers for paying on time, and maintaining communication. Never before had the Car Loans Inc customer base been incentivized with Amazon cards, Redbox rentals, Starbucks lattes or tickets to local basketball games – just for keeping to a payment plan.
Relevant Case Study Data
- Of those invited to participate, nearly 50% adopted the app
- After a 12-month period using the PaySwag mobile platform, Car Loans Inc experienced a 50% reduction in severely delinquent loans
- 46% of PaySwag users elected to earn points by watching educational videos
- 52% of PaySwag points were awarded for consistent on-time payments
- 68% of PaySwag users made payments using cash at the 17,000+ integrated locations
The Subprime Experience
Consider the figure $1 trillion dollars. This is the staggering amount of subprime auto loans that have a 25 percent default rate in America. Without debit or credit cards, subprime borrowers have limited methods of payment (often relying solely on cash transactions), making the repayment of loans exceedingly difficult. The current collections process, normally associated with angry calls, unopened letters, limited payment options and an onslaught of additional fees, is ripe for a smartphone-era upgrade.
By combining mobile access and alternative payment technologies, automotive dealers and lenders, such as Car Loans Inc, are able to give borrowers the tools they need to make on-time payments. By transforming how the underbanked communicate with lenders, payments become more accessible, rewarding and likely.
Convenience of Cash or Card Payments
Through PaySwag’s cash payment technology (derived from a partnership with PayNearMe, subprime borrowers were given the flexibility to make loan payments, in cash, at more than 17,000 convenient neighborhood locations in Car Loans Inc’s Nevada test region.
If a customer wanted to make a cash payment, they need only to go to their nearest 7-Eleven (or other neighborhood payment location found on the in-app map), hand their mobile phone to the clerk who would be able to scan a bar code, and accept the payment in cash. A notification that the payment has been made would be immediately visible on their mobile device, and applied towards their payment plan.
Gamification & Rewards
Engagement and rewards are key to taking the pain out of loan payments for subprime borrowers. Through PaySwag, Car Loans Inc customers were able to earn “swag” points by making on-time payments, communicating with lenders, keeping their customer profile up-to-date or watching short videos on credit, budgeting and saving to improve their financial education. Once the points are earned, they translate directly into rewards that this specific market enjoys. By gamifying the payment experience and adding rewards as incentive to stay on track, the entire process becomes fun and engaging.
“Using the PaySwag app, we have the ability to give our borrowers something that no other company provides for them. With an on-time payment or a spin of the wheel, they are rewarded with points that they can use at Starbucks, on Amazon or to go to baseball or basketball games. They love it,” said Barbara Mearse, director of operations at Car Loans Inc.
“With PaySwag’s technology, rewards and simple communication styles, we were able to minimize defaults and maximize customer engagement at Car Loans Inc. Being able to see a 50 percent reduction in seriously late loans is a huge deal for companies like ours. Bottom line: with PaySwag, we create more revenue,” explains Blake Vanderwell, director of finance at Car Loans Inc.
For Car Loans Inc, the implementation of the PaySwag platform proved vital to the collections process. To date, borrowers previously unable to establish efficient payment methods due to lack of banking or credit services, were able to use the PaySwag platform to conduct more than 14,000 unique transactions—yielding $4.22 million in recouped debt.
“We’ve really turned the corner on how collections work. We’ve managed to get people excited about paying their bills, meeting their obligations or making payment arrangements when they get in trouble,” said founder and CEO of PaySwag, Max Haynes.
For more information about PaySwag visit their website.
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