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Mohamed El-Erian Buys Into the P2P Space

Mohamed El-Erian, the former PIMCO Chief Executive, is moving into the peer-to-peer industry with a $12 million equity investment in a new platform called Payoff.

a man in a suit

This comes just a day after Orchard announced a $12 million Series A fundraise that saw a number of eminent investors piling in – including John Mack (CEO of Morgan Stanley) and Hans Morris (former president of Visa and managing partner at NYCA). It’s clear that a growing number of celebrated financial professionals are being won over by the potential of the alternative finance industry and are actively searching for opportunities to buy in.

Payoff is a peer-to-peer lending platform designed to help people pay off their credit cards and improve their credit score. Borrowers need a FICO score of at least 660 in most cases to get approved by Payoff. The platform also needs to see 3+ years of credit history, and to analyze the disposable income of potential borrowers. 

Scott Saunders, founder and chief executive said:

“On average, our customers see a credit improvement after 90 days with Payoff Loan.”

Payoff, in a similar vein to the UK-based AltFi Awards winner QuidCycle, will ease borrowers out of credit card debt by refinancing that debt at more affordable a interest rate. Mr. Saunders has created a brand that resonates with indebted borrowers and that has the potential to offer financial relief to thousands. Mohamed El-Erian explained the proposition:

“Scott has assembled an incredible team devoted to understanding better why people get themselves into debilitating debt and thus how to help them regain financial viability more quickly.”

“That includes those over exposed to credit cards at rates of over 20 per cent. It doesn’t take a financial engineer to tell you that their debt dynamics are stressful, undermining their ability to live fulfilling lives.”

Mr. El-Erian left Pimco in January after a decorated run at the company. He was reportedly looking to spend more time with his daughter and in fact met Scott Saunders at his daughter’s theatre group. He brings a great deal of prestige and a wealth of experience within the fixed income world to the platform. And he joins an already illustrious group of investors. Those investors include: Bill Cvengros – Founding CEO of PIMCO, Peter Shea – CEO of Entrepreneur Media, Jim Nordstrom – Former President of Nordstrom, Chris Carey – CFO of National City Bank and many more.

In an interview for Bloomberg 5 months ago Mohammed El-Erian described his desire to get involved in the alternative finance sector and improve the finance experience for people who are not well served by the existing financial model. Mr. El-Erian compared the current disruption in finance to developments in the world of media; there are now lower running costs, and lower access costs.

In that same interview, Mr. El-Erian also pointed to the game-changing role that behavioural finance (which accounts for physiological factors in economic decisions) can play in this sector. Payoff will look to incorporate behavioural science into its own due diligence – taking advantage of technology that factors new troves of online data into the underwriting processes.

It’s not clear exactly how Payoff justifies its status as a peer-to-peer lender. From the company website it is difficult to determine whether it’s possible for investors to lend money via the platform. The site currently displays just 16 investors and 4 of these are classed as institutional investors. And yet it has been widely publicized that Mohammed El-Erian is very interested in the peer-to-peer lending sector and it is possible that his investment could be the start of a change in direction for Payoff – into the peer-to-peer lending arena.

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