Can a Mobile Lending App Save Millennial Credit Ratings?

Millennials hate credit — but a new service called Lenny is out to change that.

Lenny is meant for mobile (of course) and launched today in California. It will reach Texas, Florida and New York in the next 10 to 12 months, according to the company, which claims that, in less than three minutes, a user can download the app, sign up, and apply for a credit line from $100 to $10,000 with 0% interest (until the first missed payment, that is).

The CEO and founder is Joe Bayen, an exceedingly energetic second-generation entrepreneur from Paris, who earned his first degree in Miami. Just after graduation, the reality of pernicious debt hit him square in the face. “I had to go through debt consolidation… they bundled all my debts into one and it took me nearly five years to pay everything off, after which I had to start from scratch. My credit score did improve over time, but I believe millennials should not have to go through this system.”

Currently Lenny lends off its balance sheet — more about where Bayen’s money comes from below — but has plans to launch an SPV in which other investors, including hedged funds (SoFi?) can take part.

Bayen was inspired by a friend from his salad days at PayPal at South by Southwest, who told him, “It is expensive to be poor. Having a bad credit score is very expensive. It turns into high charges and interest rates on every purchase in the future.” Even with a great job in Silicon Valley or New York, those with low credit scores have to pay more for auto purchases, other loans, and even insurance.

Clearly no stranger to the financial disillusion persuading many college grads to accept jobs with practically nothing to do with their academic studies (let alone their capabilities), Bayen nevertheless believes the current credit score system is a useful one, and worth preserving.

There are a lot of experts currently talking about going through an alternative credit system. I think FICO credit ranking overall is an accurate way to measure someone’s behavior. It’s a good way to identify early on if a user will be a responsible borrower. Like that system, we are using various ways to rate a user: major, background, education, prior investments.

“We also look at geographical location, any social media presence — especially Linkedin, Facebook, et al — all to determine who that person really is,” Bayen said. 

The most cerebral and paper-heavy logistics about leveraging mobile lending into a format capable of actually improving a user’s credit score is porting the process to the nation’s major credit institutions, e.g., Equifax, Experian, and TransUnion. Lenny has already solidified working relations with both TransUnion and Equifax. Though Lenny has not yet rolled out beyond California, Bayen said that the app can already be used for peer-to-peer transactions nationwide. (Time to call up rich friends…)

When asked about what kind of funding and number of rounds Lenny had to muster before launching, Bayen answered with deadpan humor that as of now, $400,000 had come from himself, and $200,000 from friends and family.

I could afford to do this because my last company did really well. No person in his right mind would have invested, actually he shouldn’t have invested. Having enough funding already is actually a bad idea. If you have too much money you become lazy, having too little inspires a sense of passion from desperation.

Bayen raised his side of the money in another business he started with his dad called freeappaday.com, and together they generated $18.3 million in three years. A bootstrap business from the start, the two Bayens built one of the largest iOS app commercial platforms, which has worked with Groupon, EA, Xinga, Kabam, King.com and Candycrush, Supercell, Machinezone, and many, many others. “Anyone who’s anyone worked with us.”

Bayen plans to launch a new instant debit availability within the next three to four months. This will be a point-of-sale credit option for users. Upon making their payment, users are prompted to download the Lenny app. After completing the short registration process (ostensibly less than three minutes), the funds are made available in the recipient’s debit account. Lenny will offer this service after completing negotiations with two realtime technology providers.

Bayen hopes Lenny’s services will stick with the first-time users, and remain a permanent part of their financial life cycle. “If a bank has been helping you along the way, why would you change banks?” he asked. “Since we’ve…learned about their behavior, why would they change their debtor?” Lenny claims to be the first company to offer unsecured credit lines via mobile, as well as the first to introduce lending within the P2P payment industry. If that weren’t enough, he also plans to offer free credit scores within the next week, with an in-house, Lenny credit score system to help millennials reintegrate their quantitative selves, by Q4 2016.

In Bayen’s eyes, Lenny will help millennials get past all the regulatory hurdles and still maintain the freedom to choose higher-quality standards of living. “I realize why I did it, it’s the privilege of helping those that were cast out of the system.”

Lenny is able to grow and adapt to users’ needs despite low credit scores, and this is perhaps to a large degree because of their partnership with the major information services technology firm Dwolla. Dwolla, despite its recent troubles, has a history of providing inexpensive and reliable services to fintech upstarts.

According to Bayen, Lenny is on track to issue 60 loans per day. “And in only one state!” he said. “We’re growing exponentially.”