Canadian start-up LottoLend launches to offer a “safe, fair and rewarding alternative to traditional payday loans”
Canadian fintech start-up LottoLend has launched with a mission to provide a “safe, fair and rewarding alternative to traditional payday loans”, according to its co-founder.
LottoLend aims to “incentivise responsible borrowing”
The company writes on its website that it has been created to “help Canadians become more financially secure” and aims to “promote financial inclusion and incentivise responsible borrowing”.
In 2021, LottoLend’s parent company, Networthy Inc., was established with the aim of offering prize-linked savings accounts (PLSAs) to Canadians through a neobank model.
However, after spending a “couple of years building the business plan” and securing agency agreement offers from two unnamed Schedule 1 Canadian banks, the duo made the “difficult decision” to pivot the business from PLSAs to a prize-linked loan (PLL) model “about ten months ago”, one of the co-founders explains in comments to FinTech Futures.
The company now provides short-term unsecured cash loans, repaid by pre-authorised debit when a user receives their salary payments.
The founding partner explains the move: “We shelved the PLSA model because we decided that the short-term small-value unsecured loan market coupled with a prize-linked incentive would better fit our criteria and offer more value to Canadians.”
He notes that payday loans are “typically vilified for the high interest they charge”, with individuals who need payday loans “usually in a financially vulnerable position” struggling to meet loan terms.
There is a “real need for instant, short-term, unsecured loans in Canada”, asserts the co-creator, adding that by pivoting to the PLL model, the firm can “do the most amount of good by focusing our efforts on the Canadians most in need of help”.
“We offer a promotional contest, not a lottery”
When discussing LottoLend’s features, the co-founder says: “We’ve taken the excitement of the lottery and combined it with personal loans that offer better average rates and cash prize rewards. We pool a portion of the revenue we earn from lending and pay it out to lucky customers through weekly cash-prize draws.”
For every $10 borrowed, customers receive an entry ticket, and once their loan is fully repaid, the tickets are automatically entered into the next weekly cash prize draw. Draws are held weekly, with prizes ranging from $10 to $10,000, available in both fixed and variable amounts.
LottoLend is currently licensed to operate solely in Alberta, but the company plans to expand its prize-linked loan offering “across Canada, and eventually other countries”.
Moreover, the company intends to introduce several new products, including a prize-linked spending card, loan insurance, a prize-linked line of credit, and, in time, the co-founder hopes to “come full circle” by reintroducing PLSAs.
LottoLend is currently being bootstrapped by its founders, though two unnamed family offices are reportedly “keen to invest when we eventually look to bring in outside capital”.
