Meet Beverly. She's worked at UPS for 10 years. She has one to two kids and is earning $40,000 to $50,000 per year. She has limited or no access to credit and can't handle an unexpected expense of more than $500. And her fridge just broke.
Chris DiMarco knows Beverly well; she's a hypothetical representation of the target customer for Perpay, the fintech company he launched in 2014. DiMarco co-founded the Philadelphia-based Perpay, along with David Hayne, with the goal of helping people who struggle with debt better afford unplanned big-ticket purchases.
On Perpay's Amazon-style shopping site, users can buy items from brands like KitchenAid and LG--basically anything you can find at Best Buy or Walmart, DiMarco says. They pay for purchases over time with deductions from each paycheck.
Instead of charging interest to make money, Perpay operates like other e-commerce marketplaces: It buys items wholesale from distributors and sells them at a markup. The model is paying dividends. With more than one million users to date, Perpay's revenue has grown 18,166 percent over three years to $22.5 million in 2018--helping it land No. 5 on Inc.'s annual tally of the fastest-growing private companies in the U.S.
A light bulb moment
This isn't DiMarco's first time on the Inc. 5000. In 2015, his previous venture, Lamps.com, a Philadelphia-based e-commerce site that primarily sells lamps and other lighting equipment, landed on Inc.'s list at No. 161. While the 12-person company pulled in north of $3 million in revenue that year, DiMarco got the urge to start another company, so he stepped down as CEO.
His idea for Perpay came from examining Lamps.com's HR benefits. Various providers promise to reward employees with items like discounted movie tickets, among other goods. Vendors clearly had large enough profit margins to afford discounts, and were choosing which companies could access them. DiMarco wondered if he could make a direct-to-consumer version.
He posed the concept to Hayne, his childhood friend who was the COO of Free People, a women's apparel brand owned by Urban Outfitters that Hayne's father founded in 1970. Hayne, Lamps.com's first investor, was intrigued.
The pair started by identifying common financial stresses in people's lives to find their ideal customer. Working backward, they stumbled onto the Perpay marketplace concept; both men had worked in the retail world, but neither had any formal experience with the rent-to-own industry, which differs from the layaway model by allowing customers to obtain the goods they want immediately and pay for them over time.
Still, the more they thought about the idea, the more they liked it: a "white knight" alternative to rent-to-own vendors that cater to vulnerable consumers, often charging them extremely high interest rates and fees. One example: Rent-a-Center, the massive Plano, Texas-based rent-to-own furniture and electronics business, regularly charges customers up to three times a retail item's list price or tacks on other fees that are roughly equivalent to triple-digit annual percentage rates, according to a 2017 NerdWallet investigation. (Rent-a-Center did not respond to several requests for comment and verification.)
Perpay also charges more than traditional retailers, on average. A Ring Video Doorbell 2 on Perpay currently costs $259.99 plus $12.99 shipping. The same item on Best Buy's website is $199.99 with free shipping, and comes with a free Amazon Echo Dot.
While Perpay enjoys an A-plus rating on the Better Business Bureau's website, it has drawn a number of complaints about its pricing. To that, DiMarco says: "We're very comfortable with our pricing, because it's so much fairer than the alternative."
Perpay may also levy fees on users who don't pay on time. The company's terms and conditions list a $35 charge each time a customer delays a payment. DiMarco counters that the company has never actually levied that $35 fee, and that the language is "standard legal verbiage" recommended by the company's lawyers. The clause, he says, exists for legal protection--and he's considering removing the fee entirely. Even so, he adds: "If you follow our rules, you'll be fine."
A place for all
Perpay could make sense for a specific segment of users, says Graciela Aponte-Diaz, a policy director at the Durham, North Carolina-based Center for Responsible Lending. Those who live in states with fewer financial regulations, like California, for instance, might consider it as an alternative to payday loans, which are small, short-term unsecured loans. Payday lenders in the state have been known to charge some of the highest interest rates in the country, adds Aponte-Diaz. By contrast, Perpay may be less attractive for those in high-regulation states like New York, as it faces tougher competition from providers.
DiMarco insists his product has a place in any employed and credit-challenged person's household, and he says that Perpay more closely competes with rent-to-own vendors than payday lenders. "All situations are different," he says. "We just work with the customer on what the best approach is."
Some customers, for example, need to find alternative methods of payment if they get fired or change jobs midway through paying for an item. Perpay employs a full-time staffer dedicated to solving those issues--solutions range from allowing customers to pay installments with debit cards to putting accounts on hold--and recently instituted automated tools to help manage payment reschedulings.
That kind of individual attention may prove challenging as Perpay continues to scale. DiMarco's short-term goal is to add more marketplace categories--the company recently added tires and baby equipment to its catalog. His long-term goal is to create stronger relationships with wholesale distributors so he can lower Perpay's prices. He also expressed interest in expanding Perpay's scope. One idea: a Perpay-backed credit card, with which consumers' Perpay history could help improve their real-life credit. Currently, using Perpay does not affect users' credit, for better or worse.
"The ultimate goal would be to improve somebody's credit to the point where they actually are a prime borrower," DiMarco says. "Can we do that today? No. But we'd like to keep providing more products to our best customers."
Clarification: An earlier version of this article contained a reference the inclusion of which overemphasized the significance of Perpay's terms and conditions statement regarding its ability to edit or otherwise alter online reviews. The reference has been removed. While the company can edit or otherwise alter third-party reviews, the company doesn't, nor does it plan to.