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US fintech Pesto raises $11m to rival pawn lending

The fintech is launching Pesto Mastercard to offer underbanked Americans an affordable lending alternative.


James Savoldelli/Pesto.

US-based Pesto has raised $11m and is launching a credit card as it takes on the American pawn lending industry.

Its first product, Pesto Mastercard, is issued by Continental Bank and allows customers to use their valuables as collateral to secure a credit card.

Following a similar method to that of a traditional pawn shop, consumers send Pesto their assets which are assigned a value.

But they are then provided with a credit card based on that value, regardless of their credit score and with rates lower than the typical pawn and payday loan client.

“Pesto is on a mission to help all Americans find an alternative to high interest rate loans by providing a straightforward way to secure liquidity and build credit through their assets without having to sell them,” Pesto founder and CEO James Savoldelli said.

Currently, more than six million underbanked Americans rely on high-interest rate loans, with average interest rates over 120 per cent.

According to Savoldelli, Pesto Mastercard offers interest rates at “only a fraction” of today’s alternatives, sometimes 90 per cent less than equivalent pawn loans.

“It's a paradigm shift in the credit card market, with the potential to truly democratize credit,” he said.

Savoldelli founded Pesto after studying financial inclusion and how consumers use pawnshops for repeat borrowing, and after working in a pawn shop himself to understand the industry.

He plans to use the funding — which came from investors including Activant Capital, Y Combinator, Plural and NOMO Ventures — to expand Pesto’s customer base across the US, with an initial focus on Atlanta and Los Angeles.

“Access to credit remains one of the most glaring and unnecessary sources of inequality. The lack of federal regulation and our outdated appraisal of creditworthiness leaves the most fragile populations prey to predatory lenders,” Plural co-founder Khaled Helioui said.

“Pesto's innovation can be the lever that can help lift millions of people from systemic and unnecessary financial distress, and James has the devotion required to scale its impact.”

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