Companies in this industry provide secured and unsecured loans and other credit and financing products but do not act as depository banks. Major companies include US-based American Express, Capital One Financial, Discover Financial, OneMain Holdings, and SLM (better known as Sallie Mae), as well as Housing Development Finance (India) and Provident Financial (UK).
Globalization and greater access to the internet are spurring companies to pursue growth internationally. Many large companies already have international operations and continue to expand, while small lenders tend to focus on the community or their country of origin. Some microlenders operate without geographic borders. Regulations governing lending practices vary from country to country.
The US nondepository lending industry includes about 45,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $580 billion.
Included in this industry are companies engaged in agricultural, auto, cash, commercial, commercial real estate, construction, personal, and small business lending. Credit card companies, pawn shops, home improvement, payday, and student loan companies are also included in this industry, as are companies that provide infrastructure financing, mortgage banking services, and receivables lending.
Demand is driven by interest rates, consumer confidence, and capital spending by businesses. The profitability of individual companies depends on their ability to originate, service, and collect loans, as well as to collect fees and interest on credit and other financing products. Large companies have economies of scale in securing access to capital. Small companies can compete effectively by specializing. The US industry is highly concentrated: the top 50 companies account for about 85% of revenue.
Federal financial reform enacted in the US and elsewhere in the aftermath of the global financial crisis has changed the competitive environment of the lending industry. New rules are designed to crack down on predatory lending. Lenders also have more responsibility to determine if a borrower can repay a debt before extending credit. However, the Trump administration has begun moving to roll back some regulations affecting lenders.
The lending industry is being disrupted by the shift toward online financial transactions. Financial technology (fintech) startups offer alternative business models for lending and payments. Fast-growing online consumer and business lending platforms, such as OneMain Holdings, Lending Club, and Kabbage, increasingly are competing with traditional lenders as venture capitalists invest tens of billions globally in fintech.
Products, Operations & Technology
Major products and services include charge and credit cards, mortgages, auto loans, payday loans, student loans, and business loans.
Sales & Marketing
Finance & Regulation
Regional & International Issues
Also includes the following chapters:
Quarterly Industry Update
Trends and Opportunities
Call Preparation Questions
Glossary of Acronyms