Companies in this industry make unsecured cash loans to consumers. Major companies include US-based DFC Global, EZCORP, First Cash Pawn (formerly Cash America), OneMain Holdings, and SLM (better known as Sallie Mae), along with Provident Financial and Tesco Personal Finance (both based in the UK) and Orient Corporation (Japan).
Worldwide, consumer lending balances at the beginning of 2016 totaled $42.3 trillion, according to SuperMoney, a website that reviews financial products. Consumer lending companies generally do business locally or within their country of origin, but globalization and greater access to the internet are spurring companies to pursue international growth.
The US consumer lending industry consists of about 13,500 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $34 billion.
Demand is driven by consumer income and demographics. The profitability of individual companies depends on the correct assessment of repayment likelihood and effective collections activities. Large companies enjoy economies of scale in securing access to capital. Small companies can compete effectively by choosing favorable locations or targeting niche markets. The US industry is highly concentrated: the 50 largest companies account for about 85% of revenue.
The federal financial reform law passed in 2010 created a tougher business environment for consumer finance firms. The regulations restrict credit card companies from imposing interest rate hikes and fees, limiting payday loans, and discouraging auto title loans. The law also created the Consumer Financial Protection Bureau (CFPB) to take over consumer-protection responsibilities from other federal agencies. The sweeping regulatory reforms, along with evolving technology, are changing the competitive environment of the consumer finance industry.
The internet and increasing consumer connectivity have given rise to a growing number of financial technology (fintech) companies that use technology to deliver financial services more efficiently. Fueled by venture capital, numerous fintech start-ups are disrupting the financial services and consumer lending industries by offering alternative business models for lending and payments. One such disruptive force is peer-to-peer (P2P) lending, where lenders operate online marketplaces that match borrowers directly with investors. While still relatively small, the market is projected to reach $150 billion or higher by 2025, according to PwC.
Products, Operations & Technology
Major products include installment loans and payday loans. Installment loans carry fixed interest rates and are paid off through a series of fixed monthly
Sales & Marketing
Finance & Regulation
Regional & International Issues
Also includes the following chapters:
Quarterly Industry Update
Trends and Opportunities
Call Preparation Questions
Glossary of Acronyms