Salary-backed loans are a $ 40 billion a year business in Brazil, but much of this business takes place offline. A Y Combinator startup called bxblue wants to change that by creating a marketplace for borrowers to evaluate multiple loan options in one place.
In Brazil, one of the most popular personal loan products is available for government employees and retirees. Lenders offer attractive personal loans to this group because their income is regular and guaranteed, and banks can automatically deduct payments directly from a borrower’s salary.
From the borrower’s point of view, these loans are attractive because there is not only the ease of repayment and minimal risk of default, but also the rates are much better than what they could get by financing purchases. with a credit card.
According to bxblue co-founder and CEO Gustavo Gorenstein, around 20% of Brazilians fall into this category of borrowers, and they take out more than $ 40 billion in personal loans each year. So it’s a big market, but currently most of these payroll-backed loans are issued by independent bank branches or street brokers acting on behalf of financial institutions.
But these street brokers don’t always act in the best interest of borrowers, as their main motivation is to get the best possible commission and steer clients in that direction. And for the financial institution actually issuing the loan, the offline nature of the transaction means it doesn’t really have a relationship with the borrower.
Bxblue is looking to change this industry by bringing it online and creating a marketplace where borrowers can choose which bank they want to work with. Meanwhile, lenders are able to build an ongoing relationship with customers over time as many seek additional lines of credit once a loan is paid off.
Currently in Y Combinator’s 2017 summer class, bxblue wants to be the go-to place to ease the process, as many borrowers can take on up to 20 or 30 of these personal loans in their lifetime. In addition, it allows borrowers to refinance their loans if another bank offers a better rate.
While barely a year old, bxblue signed 11 different financial institutions. Now that the lenders are on the list, he is working to attract more borrowers.