PayPal Holdings has made an undisclosed investment in LendUp, a tech-focused consumer lender that focuses on subprime borrowers.

With the investment, San Jose, Calif.-based PayPal joins several other high-profile firms that have placed bets on LendUp, which was co-founded by former Citigroup executive Sasha Orloff in 2012.

Alphabet's venture-capital arm led a LendUp funding round in 2013. Silicon Valley luminaries Andreessen Horowitz and Kleiner Perkins Caufield & Byers were among the company’s earlier seed investors.

San Francisco-based LendUp offers short-term loans that typically carry triple-digit annual percentage rates, but also carry the promise of enabling borrowers to improve their credit scores.

Carrie Dolan, CFO of Metromile
Carrie Dolan, the former chief financial officer at LendingClub, is now an adviser to LendUp's board.

The privately held company, which bills itself as an alternative to payday lenders, has also introduced a credit card with APRs between 20.74% and 30.74%. LendUp says that it has extended more than $1 billion in credit over the last five years.

The startup is seeking to differentiate itself from competitors by offering a user experience designed for the mobile phone, and by making speedy decisions on borrower applications. “Ninety-eight percent of our customers come to us on a mobile phone,” Orloff said in a recent interview.

PayPal offers a subprime credit product of its own, known as PayPal Credit, which is frequently used to finance big-ticket online purchases.

But the payments giant has hinted in recent months that it is exploring options to reduce its exposure to consumer loan defaults. At the end of 2016, borrowers with credit scores below 680 were responsible for 49% of PayPal Credit’s loan receivables.

In a press release Wednesday, Orloff said, “We’re thrilled to count PayPal among our esteemed investors, and look forward to leveraging their insights as we continue to build a multi-product company.”

LendUp also announced that Carrie Dolan, the former chief financial officer at LendingClub, is now an adviser to the firm’s board. Dolan was recently named CFO of Metromile, which offers car insurance to low-mileage drivers.

“I’m thrilled to become a board advisor to LendUp,” Dolan said in the press release. “I’m impressed with the company’s dedication to the mission of expanding credit access, lowering the cost of credit and improving financial health for people who need it most.”

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Kevin Wack

Kevin Wack

Kevin Wack is a California-based reporter for American Banker who covers the U.S. consumer finance industry.