GenFKD is all about financial literacy and promoting entrepreneurship, so we caught up with Joe Bayen, CEO and Founder of Lenny Credit Inc. A brand new service aimed at helping millennials build their credit scores, Lenny is among the fintech startups aiming to flip the banking sector on its head.
Tell me about Lenny. Can you explain the product a bit and how it all came about?
Back in 2014 I met some friends and they were these 20-22 year olds using Venmo on a regular basis because it was completely free and it let you avoid going to the bank and all that.
From my personal experience I thought we could add the lending element to help people build credit from a young age and that’s the whole point.
We are a certified lender; we report on-time payments as well as balances to credit bureaus. Every month you just make your payments, we report them.
Conceptually it showcases to other lenders that you are responsible with the funds that we gave you. It creates good habits and shows that users don’t overextend themselves.
We’re training our user base, essentially.
You’ve spoken pretty openly about your own story and how your experience immigrating to the United States influenced the launch of Lenny.
Right, so I got a track and field scholarship at the University of Miami so I moved there from France.
I was a finance major and just had no idea how the credit system worked. In France and Europe it’s completely different. As an example, for us in France, with banks you can be in the red by like $500 and not be charged anything.
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Then I came here and I went in the red $5 and they charged me $29 and I was like, “Oh my god! What is happening here?”
The impact of a single 30 day late payment can be disastrous and impact your credit score for the following seven years.
And that happened to me and I didn’t know better, it wasn’t just me, other college students were totally unfamiliar with the credit score system, too.
What the European system does is create reciprocity, because you stay with the bank that charged you zero interest and because they offer you products that you will use down the road. This creates a sense of loyalty; that’s exactly our mission as a company.
We are here to help – to honestly help – and then, down the road, we can offer things to our user base because we know them.
So that’s where the vision for Lenny came from, but how did you put it into practice?
When I graduated I went to work as a tech consultant and as an entrepreneur I did really well for myself. I launched an iPhone app website and we used to give free apps to millennials and young kids.
Apple shut the entire industry down in late 2013/2014 and I went to work as an entrepreneur in residence in Santa Monica – best move I’ve ever done. I was surrounded by so many smart people, which helped me put together that idea in a way that could really help people.
I was with the right minds around me that told me the tools that I could use to make that vision a reality.
That environment was huge.
Based on your early success, and hopefully this isn’t too invasive, it doesn’t seem like money was really an issue. So what was the motivation to come back and put this commitment into a new product?
I love that question. I could’ve gone to Maui and had relaxed on the beach. What drove me was the idea to help other human beings and, in some ways when you look back on my life as a student, myself.
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The motivation was to create a platform to help students, lots of poor people to reintegrate an entire generation back into the system where life is cheaper.
At SXSW, I heard someone say that it’s very expensive to be poor. That’s very true and we’re trying to change that but we’re not only trying to help people in a lower financial position but also really to help anyone gain more knowledge.
So, basically, you’re offering a service to a group of people that banks typically avoid or charge massive rates and there’s a reason for that. Do you have safeguards in place to not overexpose yourself to irresponsible borrowers?
We do have safeguards in place and there are limits, like maybe you can only get $100 at first.
But the reality is that we are catering to the whole millennial generation, so there are people who haven’t thought about their scores while in college.
The Credit CARD Act of 2009 is amazing – it’s a pure case of freakonomics; the government did something amazing, preventing banks from preying on young people.
Before that, banks and universities had an amazing deal: banks were paying schools to help get students to sign up.
After the crash, the Consumer Protection Agency (CPA) stepped in and said this has to end.
So the CARD Act says they can’t prey on students but also, guess what, now they don’t have access to credit cards so now they can’t build their credit score at all.
Now they graduate and they have no credit history to work with so getting an apartment or car with no history, you get a crazy rate of 18, 19, 20 percent to lease a car.
You realize when you leave college that you may have a good job and are not at risk, but you just don’t have a credit history to showcase your ability. That’s why the interest rates are so high.
You guys have … what’s kind of a radically different way of evaluating users …
Yes, so we have other ways to view borrowers.
We are using social information, like Facebook and also the educational front: school, GPA, major.
We can extrapolate enough to know whether or not someone will be good managing their credit.
You also mentioned before that you want to educate your user base. How does that play out?
We have plenty of cool stuff. We have the Lenny newsletter every Thursday with an educational post. During the week, we randomly select three users who use the app and we pick up the tab for transactions under $30.
It’s a case of having both the educational reason and the chance to have some fun with it.
We will be offering free credit score feature to users in about two weeks, so they will see how they fare.
How do you plan to grow with your user base?
That’s a crucial question … I can give you the main idea.
Basically, we are going to offer financial products that relate to different needs of our users as they age. When they leave school, enter the workforce, start a family, whatever.
We are also integrating a push to debit system, which is really interesting. Users can essentially push the credit in their Lenny account straight to their debit card.
The way it’s set up is that you can pay friends instantly or cash out and that takes a day or so, but this would let you use it instantly.
You can basically get cash instantly.
All right, well now that begs the obvious question, you see yourself eventually becoming a bank replacement? Because that’s been an area fintech entrepreneurs have —
— Haha! Well … uhh … I don’t want to say too much but … at some point, we will transition ourselves into something … (laughing) … bigger!
*This interview has been lightly edited for formatting purposes
