For people in a tough economy looking for cash, a new website
called Pawngo brings the 3,000-year old industry of pawn shops to the digital
age.
The company is backed by Lightbank, the same firm that backed a very
different kind of e-commerce start-up, Groupon. Lightbank hopes Pawngo can make
waves in the online lending space.
Click here to visit the website.
Pawngo is in the same space as a number of online start-ups providing
short term loans or cash payment services targeting the unbanked, such as
Greendot, Billfloat, Zestcash, and Paynearme. But Pawngo provides loans in
exchange for assets like jewelry or cameras, just like a brick-and-mortar pawn
shop. But will people actually use an online pawn service?
Kevin Leland, co-founder at Pawngo, wants to clean up the stereotype of
pawn shops as places for stolen property. Recently a reality television show,
"Pawn Stars," examined the lives of workers in a pawn shop, but Hills
says that show isn't a good representation of the industry.
"That's definitely going to
be the biggest challenge," Leland says. "It's going to require a sea
change of perception. The fact of the matter is there's nothing shady about the
act of pawning itself. People have been doing it for 3,000 years. It's using
items you already own to get cash when you really need it."
To use the service, people fill
out an online application form on Pawngo.com for items they want to pawn and
Pawngo will reply within an hour with a quote for how much it will loan the
person for the item.
If they agree, they print out a
Fedex label, take the item to Fedex and ship it overnight-it's insured by
Lloyd's of London-to Pawngo's facility in Colorado. Once Pawngo evaluates and
authenticates the item, Pawngo emails an offer for how much it'll offer for the
pawn. People can accept the offer and the money will be transferred to their
bank accounts. Or they can decline and Pawngo will Fedex the item back for
free.
The average loan period is three
and a half months at annualized rates from 36% to 72% That's much lower than
brick and mortar pawn shops, which charge 180% a year on average, says Todd
Hills, co-founder and CEO of Pawngo. The typical loan is for $2,000, which
means that people would pay $360 in interest on a $2,000 loan for 90 days.
About 90% of people have paid off
their loans and gotten their items back. People can also ask for an extra three
to six months on their loan as long as they pay their option charge towards the
loan.
Pawngo is filling a need because
many people can't get a bank loan for $2,000, and credit cards are becoming
harder to use to get cash. And payday lenders charge exorbitant interest rates,
Hills says.
The company does not send any
money to customers until it verifies the items, so the threat of fraud is low,
Hills says. Of the more than 1,000 transactions Pawngo has done so far, only a
couple were not real items. Hills says Pawngo is aiming for customers who are
of a higher strata than the typical stereotype of criminals pawning stolen
goods.
"That's just not the
customer we're trying to attract," Hills says. "People bump into
unexpected situations in their life."
Hills says that pawning, despite
its negative connotations, is better than taking a short-term loan. There are
actually three publicly-traded brick and mortar pawn shop companies, Cash
America International, EZCORP and First Cash Financial Services.
"We're giving a loan against
your past," Hills says. "We're not asking you to leverage your
future… You don't risk debt like with other (lending companies). You're only
risking the collateral."
Hills has a background in pawn
shops, having previously sold three different pawn shops he built up. He
recently started InternetPawn.com, which he later re-branded as Pawngo.
Pawngo has raised $1.5 million in
Series B funding from Groupon investor Lightbank and $800,000 from Series A
investors Access Ventures Partners and Daylight Partners.
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