A Financial Lifeline for Those Who Need It Most
THIS FINTECH COMPANY PROVIDES AFFORDABLE PERSONAL LOANS FOR INDIVIDUALS IN UNDERSERVED COMMUNITIES
A basic prerequisite for landing a consumer loan is a credit score. For many, this presents a conundrum: how do you get a credit score if banks won’t extend credit to you? Now, Oportun—a fintech company providing affordable financial services to low-to-moderate-income individuals— has found a solution.
About half of Oportun customers do not have credit scores. The other half have been “mis-scored,” meaning their rating does not adequately reflect their ability to pay back the loan. Oportun serves low- to moderate-income customers, many of whom are supporting families. Before Oportun, they would turn to expensive, even predatory products when times were tough, including high-cost, short-term payday loans that set them up to fail.
Oportun was founded to help people succeed by providing fair, affordable loans, enabling customers to establish or improve their credit scores. An estimated 100 million Americans have been shut out by the financial mainstream because they lacked a sufficient credit history or score, according to Oportun. Its purpose-led team uses data and technology to customize loan sizes and monthly payments for each customer. The company also provides access to free financial coaching and other partner resources. This approach helps clients obtain the capital they need while demonstrating their creditworthiness so they can unlock new opportunities.
Since 2006, Oportun has lent more than $8.4 billion by making over 3.7 million affordable loans. Through those transactions, customers have saved an estimated $1.7 billion in interest and fees, according to a study commissioned by Oportun and conducted by the Financial Health Network, a leading nonprofit authority on consumer financial health. Oportun operates in 19 states across the United States, and is expanding. In doing so, it has scaled a successful business and earned a spot on Fast Company’s “Top 10 Most Innovative Companies in Finance.”
Last year, Oportun went public. CEO Raul Vazquez credits the achievement to the team, the mission, and technology. Oportun is headquarted in Silicon Valley, which gives it access to some of the best talent in cloud technology, mobile, artificial intelligence, and data analytics. Vazquez notes technology advancements at other companies “often feel like they are focused on people who are already doing well and have a lot of opportunity.” Oportun, on the other hand, uses tech to serve the underserved.
FOR THE PEOPLE, BY THE PEOPLE
A company cannot maximize technology’s value without a skilled team. Oportun’s talented workforce share a strong sense of mission and abide by authentic corporate values, including excellence, innovation, care, and service. Through its omni-channel network, which also includes physical locations, Oportun is able to service its customers how, where, and when they want to be served. Vazquez’s leadership style also reflects company values. He abides by a servant leadership philosophy and views the org chart as an inverted pyramid. “I am not at the top; I am at the bottom and here to help others,” he explains.
This desire to help drives the company forward. Oportun is invested in helping underserved customers build their financial futures, which also fuels its growth. Vazquez predicts continued progress—for the company, and the people it serves.
vocacy, playing the fearmonger. “It’s going to be expensive,” he says. “I hope it’s all justified and doable.” Kernen offers Schulman a compliment, but a loaded one: “You need a successful business, which you have, before you can become a just business.” Yet Schulman’s own track record at Paypal, which he joined in 2014, suggests otherwise. In April 2016, when he was still in the early innings of transforming Paypal’s revenue engine and winning over Wall Street, Paypal committed to opening an operations center in North Carolina for 400 employees. The company held a jubilant news conference with then Governor Pat Mccrory to celebrate. Two weeks later, at Paypal’s New York office, Schulman stopped short in front of a TV airing live coverage of Mccrory making an announcement. North Carolina had just passed a measure requiring that people use the bathroom associated with the gender they were assigned at birth. Schulman shook his head. “That’s unbelievable,” he said. He turned to his team: “We’re out.” The decision seems to have energized him. Schulman soon aggravated gun rights advocates by cracking down on the sale of firearms and ammunition through Paypal, leading to a public spat with Paypal cofounder Peter Thiel, who objects to the policy on libertarian grounds. During the January 2019 government shutdown, Paypal stepped up to offer federal employees interest-free cash advances of up to $500. In February of this year, Schulman announced that Paypal would participate in Time to Vote, a nonpartisan initiative designed to increase voter turnout in 2020 by giving workers time off to visit the polls. Schulman is also putting real money on the line. After surveying employees last year, he discovered that 60% of those working at call centers or in hourly roles were struggling to make ends meet. Other companies have committed to paying their workers a living wage, typically defined as around $15 per hour. But after reviewing the numbers, Schulman didn’t think a living wage, in itself, would do enough to improve his employees’ financial health. In October, he increased wages, ensuring that employees in each market where Paypal operates could cover their essential living expenses, such as transportation and housing, adjusted for the local cost of living. He also lowered healthcare costs by 58%, on average; issued stock grants; and rolled out a financial education initiative. “If you don’t act on values, what you stand for, then you don’t really stand for anything,” Schulman says. The wage boosts have affected one-third of Paypal’s 21,000 employees. At the other end of the spectrum, high earners in the New York office are now paying out of pocket for their catered lunches. Meanwhile, Schulman views Paypal’s products and services themselves as a democratizing force. Many of Paypal’s merchants, for example, have expanded their operations using the company’s working capital loans. The company lends more than $1 billion every quarter, much of it directed toward small businesses in banking deserts where local bank branches have closed. On his watch, Paypal has also doubled the number of accounts it serves—a total that today surpasses 305 million merchants and consumers—and is aiming for an ambitious 1 billion. But there’s no denying that some tension exists between the company’s business model and its ideals. Paypal processes payments, and like any payments processor, it lives and dies by transaction volume, taking a small cut of each sale. Simply put, Paypal generates revenue when people shop. More and more people today are shopping online, and Schulman has ensured that Paypal is poised to take advantage of that shift, thanks to deals with the likes of Instagram Shopping and Uber. Last November, he shelled out $4 billion to buy Honey, a company that helps online shoppers find coupons and discounts. Schulman noted when announcing the acquisition that almost 40% of e-commerce revenue is generated by a “trigger event”—in other words, by something like an email containing a discount code. Honey, thanks to its data on consumer behavior, is arguably well-positioned to engineer personalized triggers and boost merchant sales. Today, on average, active users transact via Paypal three dozen times per year; Schulman sees a path to increasing that number by a factor of 10. “Eventually I want Paypal to have enough utility that somebody wants to use it every day,” he says.
ON A COLD MORNING IN
February, while in town for other meetings, Schulman pops by Paypal’s modest Washington, D.C., office, where two dozen employees sit shoulder-to-shoulder in a conference room. After brief remarks on the prior evening’s Democratic primary debate (“You can see the struggle for the soul of the Democratic Party”), Schulman opens the floor.
“Globalization can be a good thing, but it can leave a lot of people behind. How does Paypal fit into that?” one employee asks. It’s a timely question: Paypal has just announced a major partnership that will allow it to operate in China after spending the past few years courting regulators there. Already, roughly half of Paypal’s revenue originates outside of North America. “Every time I go around the world, I’m struck by how similar citizens are,” Schulman says. He recalls strolling Shanghai’s Wai Tan, or Great River Walk, on one of his many visits. “There were Chinese families pushing their kids in their carriages, taking selfies, laughing. It struck me as exactly the same as when I’m walking down [Hudson River Park] in New York City. Governments have different issues, and there’s obviously competition. But the essence of humanity is pretty much the same.” As Schulman speaks, it’s easy to forget that there’s a trade war raging between China and the United States, or that China’s current administration has an ugly track record when it comes to transgender people and other minorities (witness the ongoing Uyghur internment camps). Schulman has a knack for reorienting the room around human-scale stories, addressing hot-button topics without pushing his audience’s hot buttons. This is a political skill, as much as a corporate one. The employee gathering, in a way, feels like a town hall. As it happens, Schulman has caught the eye of Democrats, who have noticed his ability to meld business success with progressive action. Democratic Party leaders have tried to recruit him for a number of roles; former New Jersey governor Jon Corzine at one point suggested that he run for U.S. Senate. Perhaps the right person could make the case for giving capitalism an upgrade, rather than giving up on it entirely. “I’ve always been intrigued by politics, because I feel like it’s a place where you can make a real difference,” Schulman says. Back in high school, his football coach taught him that leadership is about calling plays with conviction. “You have to call in the huddle with enough confidence that everybody believes that if we execute perfectly, we will score,” he says. The habit seems to have stuck. No matter what his future holds, Schulman says, driving “substantive change” will be his focus. “I don’t want to rule out anything. I really don’t. But it’s not this big sort of tease. I’m just saying, I don’t want to rule out anything.” There’s just only so much a CEO can do.