Who needs a bank, especially when you’re young?
Hourly workers at Walmart stores, Amazon warehouses, and other big employers have been buying appliances, smartphones, and other branded goods and paying through paycheck deductions over time through Perpay. The service is run by a Philadelphia-based firm that works without the need for credit or debit cards, checking accounts, credit ratings, or other familiar intermediaries — even if customers have dings on their credit records, as tens of millions do.
Perpay, founded by A. Christian DiMarco, a former stock trader who also cofounded Lamps.com and FragranceUP.com, has grown so rapidly that it ranks in the top five companies — and is the No. 1 retailer — in this year’s Inc. 5000 list of U.S. private businesses with sales of at least $100,000 in 2015 and more than $2 million in 2018.
Perpay sales totaled $22.5 million last year, up more than 180 times over the three-year period. The company, based in Center City, employs 25.
This year’s Inc. list has 128 Philadelphia-area companies in all, or about 2.3% of the total — slightly more than you would expect, given the region’s size.
Perpay’s background is about as well-connected as a Philadelphia company could be.
DiMarco is a graduate of prestigious private schools — Penn Charter School in East Falls and Lafayette College in Easton.
Early investors in the company and its precursors include:
David Hayne, chief digital officer at the South Philly-based retail group his father runs, Urban Outfitters, whom Perpay lists as DiMarco’s cofounder;
Andrew Newcomb, one of the partners who sold Conshohocken-based eCount to Citigroup for a fat price in 2007, and went on to cofound the MissionOG investment group;
Richard W. Vague, the marketing mogul who headed First USA Bank and now serves as a leading Philadelphia investor and research and political donor.
Vague says he learned about Perpay from Philadelphia real estate investor Ira Lubert and his son, Jon, who are not investors.
DiMarco has also arranged close ties with JPMorgan Chase & Co., the largest U.S. bank. A friend from his Lafayette days connected him to the bank’s treasury services unit, which at first pushed him off — “He said, ‘You guys are not big enough,’” recalled DiMarco — then showed more interest a year later, after Perpay showed progress and JPMorgan began a big push for Philadelphia-area clients.
After talks, DiMarco took Perpay’s business from his former bank, Wells Fargo, to JPMorgan. That bank set up the streamlined, secure payment and reconciliation system that Perpay needed to process transactions faster — but still safely — and also financed Perpay’s ongoing expansion.
Brainstorming the business with his Penn Charter classmate and past Lamps.com partner Anthony Balsamo and his posse of heavy-hitting actual and would-be investors — many of them founders themselves — DiMarco had started out thinking he would market a paycheck-based retail service direct to consumers.
The shift to employers was speeded by the automation of the payroll-services business through a few large national players such as PeopleSoft, ADP, and Oracle. Perpay reaches the big U.S. employers and their workers through these widely available direct deposit services and their online portals.
“It’s no different from Visa extending credit, it’s just that our repayment method,” through workers’ regular paychecks, feels like a few steps less than paying off a credit card every month, DiMarco told me last year.
Well, it’s different in one key respect. Perpay isn’t a bank or a Visa or MasterCard member; it doesn’t charge interest but it charges a fee. So its per-paycheck charges — for an Apple device or Best Buy appliance — are set to cover all costs and partner profit margins, including Perpay’s own cut.
Even for a borrower with damaged credit, “our default risk is very low” because the payments come from the borrower’s paycheck, DiMarco said. They’ve never had to impose late payment fees on a customer, he added.
By getting borrowers on a budget, DiMarco likes to think he’s improving clients’ financial health — steering them away from expensive furniture rentals and other higher-fee services.