Mainly due to their wide reach and accessibility, pawnshops can be seen as a driver of financial inclusion in the Philippines. According to the Bangko Sentral ng Pilipinas (BSP), there are more than 17,000 pawn shop branches and head offices in the Philippines as of 2013. They comprise around 63% of financial institutions regulated by the BSP, outnumbering even banks. Pawnshops provide accessible credit, especially to those from remote areas where no banks can be found. Other than ubiquity, pawnshops also offer a faster, more convenient process compared to applying for a bank loan. In short, pawnshops make it easy for Filipinos to get short-term cash loans.
However, this is not to say that there is no room for improvement in the industry. For one, the interest rate of a traditional pawnshop can range from 6-12% monthly, aside from hidden fees and charges. Traditional pawnshops also rarely accept items other than jewelry and a few electronics. Add to that the inconvenience of queuing up and having go to the pawnshop to apply for a loan or retrieve your item.
PawnHero’s inspiration is to provide help for those who need it the most, in the easiest way possible.
PawnHero is financial technology startup out to disrupt traditional pawnshops in the Philippines. They are streamlining the process by doing the exact opposite: getting rid of physical branches. Instead, they have an online pawnshop in the Philippines where the majority of the transaction is made. More than the convenience, PawnHero also offers higher appraisals and a lower interest rate of 2.99%. The company has won the 2015 Echelon Award in Singapore, thanks to the game-changing way it offers fast, convenient, and fair credit to Filipinos in need.
We were fortunate enough to catch the Co-founder, Chairman and brainchild behind PawnHero, David Margendorff. He answered our questions on how PawnHero is changing the industry for the better.
What inspired you to launch PawnHero in the Philippines? Does it have to do with the growing tech startup scene in the country, coupled with a comparatively large percentage of the population (10% according to a 2014 World Bank Study) resorting to informal private lenders for loans?
The main inspiration has always been to open up reliable financial services to 80% of Filipinos who need it yet don’t have access. Taking out a loan usually also depends on your existing financial stability. So, right off the bat, there’s a limitation on how much anyone can even get. The fact is, most banks do not cater to this market. Aside from this, a majority of Filipinos don’t find bank loans appealing because the process takes too much time. There’s also a matter of the steep requirements that some simply can’t meet.
Traditional pawnshops have the right idea: secured lending. So long as someone has jewelry to pawn, they can turn it into cash. The only document that they really need is an ID. But traditional pawnshops come with problems of their own. For one, there are really high interest rates to consider. Some pawnshops go as high as 12% per month. There are also many hidden charges and fees to contend with that make the loan almost too expensive to repay.
We listen to the stories shared by our clients and it inspires everyone here to work harder knowing that we somehow make a difference in people’s times of greatest need.
With PawnHero, we set to make things different and more affordable for more Filipinos. To start, every step of the pawning process can be done online via our mobile app or website, therefore more convenient than going to an offline pawnshop. All one has to do is to submit a request for an estimate by describing their item. Within minutes PawnHero provides a fair loan offer via SMS and email. After that, we send a courier to pick up the item to deliver it to our central appraisal centre. We then check the item and release the money to either one’s personal bank account or to a PawnHero card, a debit card, that we issue to our customers during the pickup. The only time you’ll leave your home is to withdraw the money.
This fully online model has several advantages. We don’t spend on overhead for physical branches so we can afford to charge a much lower, fixed interest rate of 2.99% and do away with any hidden charges. This makes us the most competitive pawnshop in the country. Lastly, we accept more types of items than other pawnshops. In our more than a year of operations, we’ve accepted jewelry, handbags, watches, as well as smartphones, tablets, consumer electronics, musical instruments, and even paintings and other works of art.
So, all in all, you can say that our inspiration is to provide help for those who need it the most in the easiest way possible.
In the tradition of Reddit’s ELI5 (Explain Like I’m 5): How is PawnHero’s business model trumping that of traditional pawnshops?
If we’d explain it in one sentence: It’s the easiest way to get a loan, using what you already own as collateral, at the lowest interest rate, without leaving your house.
We like to say that our model operates on the S.A.F.E. principle:
Secure — All items are fully insured, kept safe and secured, and our business is BSP-certified and AMLA-compliant.
Affordable — One of the lowest interest rates at 2.99% with no hidden costs or charges.
Fast — From start to finish can take within 24 hours in Metro Manila and a bit longer for the rest of the Philippines
Easy — You can do it from you home from your smartphone or computer. You don’t even need a internet subscription is you are a Smart, Sun or TN customer you may use pawnhero.ph for free.
How will you describe PawnHero’s traction so far?
We’ve been operational for more than a year and remain the first fully online only pawnshop in the Philippines and people are starting to hear more about us. Every month, more and more people take advantage of what we have to offer. There are hundreds of processed requests everyday and the numbers are going up. We’ve invested in marketing to basically get the idea out there as well as in a very capable customer service team to ensure that everything flows very smoothly. We listen to the stories shared by our clients and it inspires everyone here to work harder knowing that we somehow make a difference in people’s times of greatest need. We also listen to suggestions and complaints because we believe that it provides us with a great opportunity to do better.
Pawning has that potential too, you see. It’s isn’t just for those in need, it’s also for those who want to more actively pursue their dreams.
Increasingly, we’re also starting to focus on providing for people who want to do more and achieve more in their lives. Yes, we’ve helped people react to the crises and trials that they face but we also want to be more proactive. What we’ve been pushing these days is how a pawn loan can lead to small business opportunities without the need to depend on other sources and lenders. Pawning has that potential too, you see. It’s isn’t just for those in need, it’s also for those who want to more actively pursue their dreams.
You have also launched the PawnHero Marketplace for the pawned items. How has this side of the business been growing?
The PawnHero Marketplace or the ability to sell any unredeemed item has always been an integral component of our business model. For those who are unable to pay back their loans, we recoup the debt from the sale of their items. Here’s another area where being fully online has been a great advantage: we can offer items at much lower prices. For some of the items on our Marketplace, our customers can enjoy what amounts to an 60% discount off the market price. While these items are second-hand and pre-loved, they’re also carefully screened by our appraisers for authenticity, full functionality, and maximum value. We only accept something we know we’ll make money off so you’re not getting anything not worthwhile from our PawnHero Marketplace.
A year has brought a wide range of items up for grabs with more on the way. Seeing the growth that our Marketplace has shown and its viability as essentially a business all its own, we’re looking to relaunch it in the next months. Our aim is to be competitive and make it a one-stop shop for quality pre-loved items. In a way, this is an extension of the whole concept of being heroes. Our Marketplace opens up he possibility of owning items that might be beyond the immediate reach of many people. Students, for example, will be able to purchase laptops or smartphones that will be useful for school and research without having to spend too much. And when they do get that item, they can be sure that it works properly for a long time. Overall we see the Marketplace as mutually reinforcing part to the existing loan business. To give you an example, the data we collect on the Marketplace as to how big the demand for any item is and how fast we are able to liquidate it, will help us to price our loans better. On the other hand, with a fully functional Marketplace we are able to accept pretty much everything you can imagine as a collateral for a loan – since we are able to sell it, if not redeemed.
Loansolutions is hand-in-hand with PawnHero in providing fair Cash Loans
If you want access to convenient, fast, fair cash loans but don’t have an item to pawn, Loansolutions is here. We are the Philippines’ #1 Online Loans Market Place. Our website enables you to get cash loan offers from the largest network of legitimate lenders in the Philippines through a single, online application form. Our Loansolutions Concierges will help you with the whole loan process, from application to approval.