bxblue, a start-up created by former MSc Entrepreneurship alumnus Gustavo Gorenstein (2011), is hoping to change the payroll-secured loans market in Brazil.
One of the more popular personal loan products in the country is available to government employees and pensioners. Lenders offer attractive personal loans to this group because their income is regular and guaranteed, and the banks can automatically deduct payments directly from a borrower’s paycheck.
Gustavo believes around 20 percent of Brazilians fall into this category of borrowers, and they take out more than $40 billion in personal loans each year.
It’s a big market, but currently, most of these payroll-secured loans are issued by bank agencies or freelance street brokers acting on behalf of the financial institutions.
The problem is that those street brokers aren’t always acting in the best interests of borrowers, as their main motivation is getting the best commission they can and steering customers in that direction. And for the financial institution actually issuing the loan, the offline nature of the transaction means they don’t really have any relationship with the borrower.
Bxblue is seeking to change this industry by taking it online and creating a marketplace where borrowers can choose which bank they wish to work with. Meanwhile, lenders are able to build an ongoing relationship with customers over time, as many seek additional lines of credit once one loan is paid off.
While just about a year old, bxblue has signed up 11 different financial institutions, and now that it’s got the lenders signed up, it’s working to get more borrowers on board.