Orange Digital Ventures—launched in 2015 with a €20 million (US $22.5 million) annual budget, said it has invested in PayJoy, an online platform allowing people with poor credit profiles to buy smartphones in installments. California-based PayJoy, which also attracted funding from several private equity players, says that its business model addresses up to 1 billion potential smartphone purchasers. The system works by installing PayJoy’s management software on the device, making the smartphone itself the guarantee for the lender. Orange, which did not disclose financial details, said its investment particularly targets its 110 million clients in Africa and the Middle East.
Getting smartphones into as many hands as possible is clearly a desired goal for mobile operators worldwide. Without deep penetration of these devices, full utilization of networks is not possible, and MNOs’ investments in those networks will not achieve maximum return. For many potential customers, especially in the developing world, financial barriers to purchasing smartphones are high. Installment-plan device purchasing has already become widespread even in wealthy nations; it should be even more appealing to budget-minded customers in comparative poor ones. Therefore, it is good strategy, in our view, for a multinational operator such as Orange to engage in a partnership to make smartphones more accessible to such customers. PayJoy’s technology, which claims to use the device itself as a way to offset the risks involved in installment purchases by low- or no-credit consumers, claims to use the device itself as collateral for what amounts to a loan. The company cites research by McKinsey that estimates the potential global market for its alternative credit model at US $2.3 billion. Whether or not this particular model turns out to be a winner, we firmly believe that creative plans for smartphone proliferation among populations that currently find it hard to afford them is good for operators’ business, and that therefore they should seek them out.