“Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.”

— James A. Baldwin

When most people think about or hear about “payday loans” they either don’t know exactly what they are, or have a general sense that they are somehow shady and a generally negative thing.

There are a few important things to know about the industry however. While the rules and systems vary from place to place, the general idea is pretty straight forward: if you want a payday loan, you present proof of your employment, income and next payday (typically with your last couple of paystubs) and the store will allow you to borrow up to a maximum percentage of your typical pay. You write the store a cheque, post dated for your next payday in the amount you are borrowing plus the fees the store is charging you, and they hand you your money.

Where a lot of the negativity about payday loans comes from is regarding the price. Though fees vary across jurisdictions, the average fees are usually between 15–20%. That means that to borrow $300 for two weeks will mean owing as much as $360 … and it’s often more.

Payday lenders are often vilified for these high costs, however the reality is that maintaining brick-and-mortar buildings with staff and security, and then giving out high risk, unsecured loans, over short periods of time, is incredibly expensive. An examination of some of the world’s largest payday lending corporations, reveals that of an average $20 fee to borrow $100, the overhead, staffing, and general costs can often leave as little as 50 cents profit per transaction, and in some cases payday loans are merely a loss leader for a store and their profit is made on things like bill payments or remittances.

So! Why are people using this service? If it’s so expensive and with it’s stigma … who would go? The truth is: tens of millions of people … nearly 100 million people in Canada and the United States alone. An estimated 28% of both our countries populations use secondary financial institutions like payday loan stores for a wide variety of reasons, but ultimately because they can’t get the services they need from a bank.

In very broad strokes, payday loan customers can be broken down into 2 general motivations: convenience and necessity. The vast majority, up to 70% are the convenience customers, wanting service at odd hours, on short notice, or any number of other reasons. The remaining 30% are typically getting a payday loan to compensate for sudden and unexpected emergencies. These customers may need a few dollars to cover a higher than expected electricity bill, or a sudden car repair on the vehicle they need to keep their job. Perhaps they have exhausted, or don’t have access to other sources of credit. Perhaps no one in their family or social circle can spare the money to lend it to them either. Perhaps they are in a situation where they simply have no outside support structure there at all.

Whatever the reason, millions of people use payday loans because they have no other choice. And yet our first reaction is to vilify them. To shame them. But the truth is that is terribly unfair.

Imagine you’re a new father and you discover your young son is autistic, and suddenly you are presented not only with an unexpected new reality, but with a huge influx of new expenses. Then imagine that, though your relationship with your family is strained, and that ultimately they’re in no position to help you financially even if you could ask them. Then imagine that you’ve already maxed out your credit cards on therapy deposits and various new medically related expenses and it’s a week until you get paid … and you literally have no money for that week. You’re broke.

At that point, even knowing the high cost and the risks … is it foolishness or ignorance to go and get a payday loan? Should you be shamed for that choice? … or are you in fact taking responsibility… doing what is needed, what is right, swallowing your pride and doing the hard thing to take care of your child?

We at Branche think it’s time that payday loan services, and payday loan customers, get a fresh look and a second chance. There might be issues and problems in the industry, but how much of that is due to class bias or even just a response to the existing stigmas?

It is our hope that by creating a whole new option, an entirely different paradigm for payday loans and other basic financial services, that we can not just offer amazing benefits to the convenience customers, and liberating new options to the necessity customers, but maybe switch up the dialogue a bit and change some of the views our culture has on economics, on the costs of poverty, and the social impact of financial accessibility.

Branche’s decentralized nature and community oriented philosophy means that our operating costs are low enough to have a variety of effects.

At launch, our goal is to offer payday loans at $10 per $100 borrowed. Roughly half of the current Canadian average.

The bigger we get and the further we spread, the lower our costs should get, leading to yet lower prices to Clients.

By offering flexible repayment options (like longer loan terms up to two months or using our loyalty system to decrease or eliminate fees) we hope to dramatically decrease the likelihood of loan clients getting trapped in a “debt cycle”.

By offering connections to credit counselling services and partnering with local charities, those that do end up defaulting on loans can get help taking control of their financial lives.

We will offer a special type of charity Vendor status to community organizations that will allow them to offer special and lower cost services to their clients. Branche users will even be able to donate their loyalty points (in the case of Clients) and/or a portion of their profits (in the case of Vendors and Lenders) to a local charity of their choice and receive a tax receipt.

The nature of the Vendor system means that Clients will be able to get services on their own terms. If they can’t leave their home then perhaps a mobile vendor will be available to bring service to their door. If they feel a sense of shame about getting a payday loan, then maybe their local community center will quietly offer the service without any judgement. If their nearest bank is a 40 minute drive away and they don’t own a car, maybe they can cash their cheque at a neighbor’s house instead of having to ask a family member to drive them or hitchhike.

Though the Branche app will automatically cap all fees at an affordable level, Vendors will have some ability to raise or lower their fees and the services they are willing to offer. This will create a competitive environment within the Vendor network ensuring a diversity of services and the best possible price for the Client. A convenience store owner might keep their fees incredibly low because they just want to get more customers into their store, where an enterprising cab driver may charge the maximum because he can bring the service right to your door.

Our “match making” service will help Clients find the right Vendor for their needs. Maybe a retired soldier could be matched with a special Vendor that isn’t the closest, but offers free cheque cashing to veterans. Perhaps a university student will be connected with Vendor on campus that offers a special deal to fellow students.

These are just the basics of how we hope Branche will change financial services. Ultimately we are building a system full of options and we are very sure that creative and driven people, given the opportunity, will take our system in amazing directions we could never anticipate.