Forty percent of Americans, who if faced with a $400 financial emergency, albeit a car repair, plumbing problem or the like, would not be able to afford to take care of the situation. Enter Chris DiMarco and his 2014 start-up Perpay. In five short years, Perpay has climbed to number 5 on the Inc.’s 5000 list, pulling in $22.5 million in revenue in 2018, with an incredible growth rate of 18,000%. Not bad for a guy who used to be in the lighting business.
Perpay is the fintech company he launched in 2014. DiMarco co-founded the Philadelphia-based Perpay, along with David Hayne, with the goal of helping people who struggle with debt better afford unplanned big-ticket purchases.
The marketplace for the forty percent in total who have trouble paying is obviously enormous if you can figure out how to tap into it. Perpay has. “On Perpay’s Amazon-style shopping site, users can buy items from brands like KitchenAid and LG, basically anything you can find at Best Buy or Walmart,” DiMarco says. They pay for purchases over time with deductions from each paycheck. Currently, there aren’t many places people can turn to for quick cash, and those that are available either want the title to your car or will charge you a ridiculous usury rate.
The business model for Perpay is different, as they don’t charge their customers interest. Perpay operates like other e-commerce marketplaces. It buys items wholesale from distributors and sells them at a markup. The model is paying dividends.
So how does one start a fintech business in this large market segment? The space also has rent-to-own businesses and layaway departments at major chain stores. The difference in the rent-to-own model and the Perpay plan appears to be price. One has to remember that consumers in this market can be vulnerable, and as the chart depicts, are usually less educated.
It is a common sales tactic to gloss of the high interest rates that are priced into the rent-to-own product. Rent-a-Center, the Plano, Texas-based rent-to-own furniture and electronics business, regularly charges customers up to three times a retail item’s list price or tacks on other fees that are roughly equivalent to triple-digit annual percentage rates, according to a 2017 NerdWallet investigation.
When you dig a little deeper you will find that the motives of Perpay are not all altruistic. The NerdWallet investigation showed that Perpay also charges more than traditional retailers, on average. A Ring Video Doorbell 2 on Perpay currently costs $259.99 plus $12.99 shipping. The same item on Best Buy’s website is $199.99 with free shipping, and comes with a free Amazon Echo Dot. Okay. We’re starting to sound a little more like the rent-to-own guys now.
If I were Perpay I would be constantly looking over my shoulder to see when Jeff Bezos will step in and crush my idea. There is nothing novel or proprietary about what Perpay does. They have developed relationships with manufacturers, but one would assume those same manufacturers would receive a higher price point from Amazon and the big box stores. The jury is still out on this one.