Are Payday Loans Going High Tech

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Published 11/30/2011 10:51:00 by H. Miller Views: 412
payday loans high tech
As technology evolves it becomes a part of just about every industry. Even the payday loan industry. And while the economy is still gasping for air, the payday loan business is alive and well. And thanks to ZestCash, a new payday loan company, the industry is going high tech.

ZestCash was founded by a former Google chief information officer. Their business model is built on the fact that most payday loan borrowers will default.

According to Douglas Merrill, the founder of the company, payday loan companies don't discriminate. And that's what separates his company from others. His company will judge potential customers based on what they do online. Just how amazon will recommend books to customers based on what they do on their website, that's the same way ZestCash will determine if someone is likely to pay back a payday loan.

They analyze things such as the amount of time spent on the website to the different options people look at to determine how likely a person is default. And so far, this model has worked out really well for the company. Overall, ZestCash default rates are less than half of those of the payday loan industry as a whole. That means unlike other payday loan companies, they aren't losing as much money.

Annualized, the interest rates on their loans are still far higher than those on credit cards or bank loans. However, since the default rate is lower, they can offer their customers better terms on the loans. A payday loan from ZestCash will cost you 50 percent less than those from other payday loan companies.

While the fact that they allow a computer to determine how likely a customer is to pay back a loan might seem unfair, the truth is, it is just smart business. Right now the payday loan industry is under fire because of their predatory lending practices. That's why ZestCash might really be on to something by incorporating technology into the loan process.

They won't just lend to anyone. They discriminate in an effort to keep default rates low. As other companies start to take notice, they will surely follow in their footsteps. And as new technology is introduced into the market it will start to change the whole payday loan structure. So while technology may be scary to some, it can actually prove to be very beneficial for others. Expect the payday loans industry to use technology to grow their business.


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