Parachute is Canada’s first financial wellness company, committed to helping the 8 million Canadians struggling with the burden of predatory lending. While government regulators and the media focus on the predatory practices of high-interest and payday lenders, Parachute is solving the problem by providing a pathway to help bring customers back to good financial health.
Origin Story
Parachute’s Co-founder and CEO Bruce Hodges has a long corporate history with 30 years in financial services, including a startup in the .com days. He spent 16 years overseas, living in 7 countries, where he worked in dozens of senior roles including CIO, COO, and CEO at major financial institutions. On returning to Canada in mid-2021, Bruce began incubating with Highline Beta as a founder in residence—tackling the payday loan space first and then expanding to include higher-interest lenders in what the government regulators and the media call the predatory lending space.
At the time, this was a bit of a passion project for him, in that at the ripe age of 23 he was given poor financial advice and coached to declare personal bankruptcy. This is a story he’s only started telling in the last 18 months:
“We as a company have a very strong purpose at the core and I also have my own personal purpose at the core of this, which I think is important in a startup, because it’s hard, and so I have a conviction, bar none.” -Bruce Hodges
Bruce thinks that it is extremely important that everybody at Parachute has either spent time working with customers or has at some stage of their life, been one of their customers because of the stigma attached to financial issues.
The Problem
Many factors can lead people into financial hardship—divorce, job loss, and the impacts of events like COVID-19 are some of the most significant. Sometimes, it’s simply the result of poor financial decisions. Regardless of the cause, once someone’s credit score is damaged, escaping that situation becomes incredibly difficult. Borrowing becomes more expensive, as lenders offer loans at higher rates to those with lower credit scores, and this, in turn, further impacts the borrower’s credit score. It creates a vicious cycle where multiple forces keep people trapped.
When it comes to the high-interest and payday lending segments, the landscape in Canada has become even more challenging. During the financial crisis, many companies exited the high-interest market, leaving only two major players and a few smaller ones behind. This lack of competition has led these lenders to charge rates close to the legal maximum—47% APR under Canada’s usury laws. Unfortunately, borrowers often have no choice but to accept these high rates. Parachute aims to break this cycle by offering loans at significantly lower rates, providing a fairer and more sustainable solution for those working to regain their financial stability.
The Parachute Solution
Parachute’s customers save anywhere between $200 – $300 a month. Customers also gain access to Parachute’s “Financial Recovery” platform, where they have several tools and technologies, including financial insights driven by open banking. These tools are meant to help customers by educating and coaching them, as well as getting them through the sticky bits of behavior change to get them back to good financial health. The cornerstone of this is that customers can earn up to 10% of the loan principal back in cash on a monthly pro-rata basis. To unlock this, they need to self-assess themselves against their financial goals each month.
There are four goals: making bill payments on time, not taking on new unsecured debt, maintaining a healthy credit utilization (keeping credit cards below 50%), and a free-form personal goal. Parachute tracks this behind the scenes but it’s also important for customers to take accountability and self-assess themselves every month.
Parachute has very successful engagement in the dashboard: Around 70% of Parachute’s customers have self-assessed themselves against these goals every month since the company started. Additionally, on average, their customers are doing between 8 and 10 activities in the dashboard every month. Between 60% and 70% of Parachute members complete seven to eight micro-learning quizzes in a month, covering topics such as tax, budgeting, mortgages, and RRSP’s.
Real-Life Examples
Bruce explains, “We can expect early adopters who quickly make the change; that stick with the program, and rapidly get back to good financial health. You’re also going to have a large group in the middle that has some challenges along the way, and we expect we will have a few frequent flyers that may be back multiple times to borrow again but, we will adapt their journey to their needs, and be with them every step of the way.”
Many people don’t fully realize just how predatory this industry can be. Marie, one of Parachute’s clients, was on her path to financial recovery when she felt forced to take out a $20,000 loan at a 37% interest rate from a major high-interest lender to support her child, who was struggling with mental health and addiction issues. Along with the loan, she was sold a $10,000 creditor insurance policy with life, disability, and job loss coverage, known as creditor insurance. The lender added this cost to the loan principal, charging 37% interest on the entire balance—a common practice among Canada’s large high-interest lenders. This unfortunate situation has made her journey more challenging, but she continues to work with Parachute and is making good progress.
Another client, 35 years in her job, with an income of $75,000 came to Parachute. She had $19,000 in high interest, debt, no free cash flow, and was borrowing at a 44.99% interest rate—excluding any potential costs for insurance. She had a credit score of 597 and a wellness score of 50 out of 82. Working with Parachute allowed her to free up $481 in cash flow and borrow at a lower rate of 29.99%. In addition, she can still earn the 10% back in cash. Her credit score went up fairly quickly to 610 and her wellness score to 65 out of 82. She has completed 110 activities in the dashboard, earning at least some portion of cashback every month and her journey continues.
Achievements and The Future of Parachute
So far, Parachute has lent a total of $3.1 million to just over 210 clients and has crossed $2 million in equity capital raised. They are currently building a credit union Consortium with the intent of having multiple credit unions across Canada use Parachute for their client base. This would provide credit unions with the necessary data and tools to help their clients who have high-interest or payday loans. There are thousands of credit union customers and potential customers who need a solution:
“Many of the credit unions have looked at or considered tackling this segment at some point, but only a few have taken action, and those have been very small projects. Parachute plus the credit unions, could be powerful enough to effectively disrupt the predatory lending space. Together, Parachute and the credit unions will have a lower cost of capital, a wider distribution base, and a strong social purpose at the core—a significant contrast to the predatory lenders. We’re very purpose-aligned, as are the credit unions, so it’s a unique offering that makes us a perfect match.” -Bruce Hodges
Parachute plans to announce its first credit union pilots very soon.
The Impact of Angels
Parachute has raised in total more than $2.1 million CAD and has recently closed $1.5 million CAD in seed funding from Archangel Network’s Adrenaline Fund, Highline Beta, and other angels. Apart from Archangel Network of Funds and Highline Beta, Parachute is fully angel-funded:
“The challenge of angels is there’s many of them. We have 50 angels on our cap table. That’s a lot of pitching; a lot of meetings. There’s a certain overhead that comes with that; however, there are a lot of benefits that come with that as well. Every time you pitch, every time you present, they have great advice and suggestions.” -Bruce Hodges
Many of Parachute’s angel investors were introduced through groups like Golden Triangle Angel Network (GTAN), Georgian Bay Angels, and Archangel Network:
“Without the angels, we wouldn’t exist today, and we wouldn’t be building a solution that’s going to help millions of Canadians get back to good financial health.” -Bruce Hodges
