Consumer Lending

Consumer Lending

Brief Excerpt from Industry Overview Chapter:

Companies in this industry make unsecured cash loans to consumers. Major companies include EZCORP, FirstCash, OneMain Financial, and Sallie Mae (all based in the US), along with Orient Corporation (Japan), and Tesco Bank and Vanquis Banking Group (both based in the UK).

COMPETITIVE LANDSCAPE

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.

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 payments. Installment loans can be unsecured or secured by personal property and other forms of collateral. Payday loans, so called because they are often payable on a borrower's next payday, are small, short-term, unsecured loans that typically carry higher interest rates. Many large companies in the industry operate in the?"subprime"?portion of the market and offer loans to customers with limited access to other sources of credit. Subprime borrowers may have a history of delinquent loan payments or no credit history, and often have low income and a higher debt-to-income ratio. Companies that originate and manage student loans are also included in the...