Technology is driving much of our financial lives onto mobile phones, but many Americans still prefer to carry cash.

In a nod to that reality, the mobile-centric consumer lender LendUp is entering into a partnership with money transmission chain MoneyGram. Over time the deal will allow the startup firm's borrowers to pick up and make cash payments on their loans at thousands of grocery stores, pharmacies and other retailers across the country, LendUp Chief Executive Sasha Orloff told American Banker.

The partnership is being rolled out in two phases. Starting Monday, LendUp customers will be able to make payments on their loans at MoneyGram locations. At an unannounced future date, they will also be able to receive their loans in greenbacks from the same stores, according to Orloff.

LendUp's customers can already use electronic bank transfers, checks and debit cards to make payments on their loans. But Orloff said in an interview that it's hard to change cash-dependent consumers' behavior, "and now we don't have to."

"There's just a certain percent of people that like to deal in cash," he said.

Pete Ohser, MoneyGram's executive vice president of U.S. and Canada, said that the LendUp partnership gives more options to customers who use payday lending services. "Consumers want quick and convenient access to funds," he said in an email.

LendUp borrowers who make a cash payment at a MoneyGram location will have to pay an additional fee — which will initially be $6.99, according to the two companies — that doesn't apply to digital repayments.

But Orloff said that for cash-carrying consumers who are accustomed to using storefront payday lenders, the LendUp-MoneyGram partnership will offer certain benefits. He noted, for example, that all of LendUp's loan payments go toward the payment of principal and interest.

LendUp's loans generally carry triple-digit annual percentage rates — one example listed on the company's website is a 30-day loan of $100, which carries a fee of $16.70, terms that work out to a 203% APR. Still, they can often be cheaper than traditional payday loans.

LendUp is currently licensed to operate in 15 states, including California, Texas, Oregon and Missouri. But residents of the other 35 states and the District of Columbia are not eligible for the loans. 

That means that LendUp will not be able to fully tap into MoneyGram's roughly 39,000 nationwide locations, at least initially. MoneyGram services are available in a variety of retailers, including supermarkets, pharmacy chains such as CVS, mom-and-pop stores, and check-cashing and payday loan outlets.

Orloff has spoken previously about his goal of entering into partnerships with banks on small-dollar loan products. A partnership with a bank would give the San Francisco-based startup the ability to make loans in all 50 states since banks have the legal ability to operate nationwide.

Any bank that is considering a foray into small-dollar consumer lending will likely be mindful of federal regulatory guidance that instructs bankers to determine the borrowers' ability to repay the loan; that guidance drove several large and regional banks, including Wells Fargo, U.S. Bancorp, and Fifth Third Bancorp, out of the business early this year.

In an interview Thursday, Orloff said that LendUp borrowers will be able to use mapping software on their mobile phones to see the closest retail location where they can use MoneyGram to make a loan payment. Some of those stores are open 24 hours, which adds convenience. "It's the brick-and-mortar payday loan killer, effectively," Orloff said.

LendUp is not the first small-dollar lender to make use of a large multi-store retail network. For example, Progreso Financiero, a lender focused largely on the Latino market in the U.S., allows its borrowers to use the PayNearMe network, which is available in many 7-Eleven, Family Dollar and Ace Cash Express stores.

However, Progreso is not currently marrying borrowers' mobile phones with the brick-and-mortar channel.

Arjan Sch tte, a managing partner at Core Innovation Capital, a venture capital firm that specializes in financial services for people outside the mainstream banking system, had mixed things to say about LendUp deal's with MoneyGram.

"I think it's a really exciting and natural extension of what LendUp has started, which is an online modernization of payday lending," Schutte said, noting that many of the people who need short-term loans prefer to deal in cash.

But Sch tte also wondered whether there is significant overlap between the demographics of LendUp's relatively tech-savvy customer base and those people who prefer to carry cash.