I Can Predict the Future of Small Dollar Lending
Published: Thu, 10/31/13
I have the advantage of speaking with publicly traded management and
mom and pop operators on a daily basis. Additionally, Trihouse does
a lot of recruiting. And, I talk to current and former employees of
lenders and vendors.
So, the future in a nutshell:
Prefer to read online: http://paydayloanindustryblog.com/?p=2158
US consumer demand has contracted slightly. BUT, your ability to
offer small dollar loans to consumers lacking traditional bank
accounts via new, disruptive, dollar delivery sytems adds 30M+
potential borrowers to our vertical.
The quantity of "traditional" borrowers has declined slightly. Your
future as a Lender is dependent on employing a multitude of $$
delivery sysytems you offer.
Long-term, consumers will be back. The question is, who will be left
standing to serve this demand? Restructuring and $$ delivery systems
are disrupting the status-quo.
Crazy, convuluted, add-on products and creatively named product
offerings lacking full disclosure will not fly much longer.
Call your product a PDL, a line-of-credit, an installment loan...
whatever! You will have to adjust to the regs soon or die!
The challenges for both de novo and current small internet lenders
appears daunting. 5% - 7% of revenue must be devoted to regulatory
comprehension and compliance.
Large, "non-gold" dependent lenders having a proprietary LMS platform
and a conservative licensing model deserve your attention. Success
is really about liquidity, execution, product differentiation,
multiple delivery systems, customer service, collections expertise
and your ability to service the unbanked via new technology.
Consolidation is occurring (I know, shocking news!) Lenders have
been "dropping like flies." Borrowers in states such as
NY, PA, NJ are literally begging for loans. As a friend wrote me
today, "Who is brave enough to loan to my former, 'good' NY payday
loan customer?" The answer, NO ONE!
There are still ACH providers - and new ones coming - to serve
Lenders. Obviously, your licensing model impacts ability/costs/scale/time line. ACH providers make $$ by enabling
lenders to scale transaction volume. They do not want/need any
regulatory "heat." Lenders meeting their criteria will
prevail. Think of this as a funnel of borrowers into a few,
substantial Lenders serviced by the remaining ACH providers. Add
the "wallet" as another option to ACH.
Go long DLLR, AEA, the USA, Canada, the UK...
Paytoo - go long! (Still have not demo'd the virtual wallet?
Paytoo now offers Check-21 capability!)
Request an online demo: https://trihouse.wufoo.com/forms/request-for-demo-of-wallet-via-trihouse-consulting/
Your future depends on your brand/consumer awareness/recognition/compliance
Liquidity is essential to long-term success.
Short-term outlook? Tough. Long-term? I'm very bullish and have
bet my own money :o)
At some point, you will have to substantiate you are 100% compliant
with state/fed regs. As Jeffrey Weiss with DLLR pointed out, provinces and
states move at a "varying pace of enforcement. The UK is a national
approach = FASTER enforcement. Canada & USA = a federal system.
They move at a different speeds.
Your business model is going to have to adjust to fewer interest
only rollovers. Get your biz model and costs in line to prepare for
this certainty.
Want to put $$ to work? Call me 702-208-6736. Multiple methods to
collaborate/partner, launch... Let's explore!
(NOTE: I ALWAYS assume we have an NDA when talking privately.)
FULL DISCLOSURE: I may make some serious coin if you follow any of
this FREE counsel :o)
Jer - Trihouse
702-208-6736
Jer@TrihouseConsulting.com