$36 Billion Alternative Financial Services Market Serves “Unbanked” Consumers

November 4,  2020:   Marketdata LLC, a leading independent market research publisher of “off-the-shelf” studies about service industries since 1979, has released a new 211-page report entitled: U.S. Alternative Financial Services Market. This is new market study about a controversial $36 billion business.  The study examines the operations of: check cashing stores and money transfer services, pawn shops, payday loan services, and rent-to-own stores—which serve the “unbanked“ and ”under-banked” American households.
   
  According to Research Director, John LaRosa: “These businesses exist to serve the “unbanked” or “subprime” market – 9 million low income households. However, more middle income consumers are also using them, due to their convenient hours and accessibility.”
 
Major Findings:

- There are about 9 million U.S. households with spotty credit that are “unbanked” or “under-banked” and shun traditional banks due to trust issues, high fees, inconvenient hours and tight credit policies. These households don’t have a checking or saving account and use alternative financial services instead.

- Marketdata estimates that the market was worth $37.6 billion in 2019 -- 1.8% less than in 2018. The industry’s peak was 2013, when the market was worth $43.8 billion. Marketdata forecasts a 4.3% decline in revenues this year, to $36.0 billion, due to the pandemic and recession. For the long-term to 2025, Marketdata forecasts 3.03% average annual gains to $41.5 billion.
 
- The largest competitors such as Purpose Financial, Populus and First Cash (Advance America, ACE Cash Express brands) have grown via the acquisition of smaller players, franchising, new technologies, and expansion into overseas markets such as Latin America.
 
- There are 12,000 check cashing stores, 14,000 payday loan outlets, 800,000 money transfer agents, 11,000 pawn shops and 10,000 rent-to-own stores competing for this business today.
 
- Not all market segments have fared equally. Rent-to-own stores’ revenues are estimated gain 6% this year, as home-bound customers loaded up on rented merchandise such as computers and appliances during the Spring. By contrast, revenues in 2020 are expected to be down 22% for check cashing outlets, down 12.2% for money transfer services, down 2.6% for pawn shops, and down 15% for payday loan companies.
 
- Pawn shops was a $13 billion business in 2019. Check cashing is worth $1.7 billion. Money transfer is worth $7.8 billion. Payday loans and online apps is worth $4 billion. Rent-to-own stores take in $11 billion.
 
- The shift to more online services and apps has been accelerated by the Covid-19 pandemic. Online services account for an increasing share of the business in all five sectors, especially for small installment loans online that are replacing payday loans.
 
- The industry’s revenues have been declining nearly every year since 2013, due to a combination of factors: increased regulation, increased competition, changes in technology, and currently, a recession caused by the Covid-19 pandemic.
 
- Most of these retail outlets remain open during the pandemic, as essential services, but transaction volume and revenues for outlets such as check cashers in many states are down 20-30%.

“This is an industry that is still in demand, despite criticism by some consumer protection groups that high fees are taking advantage of users. Only when banks are open 7 days a week and not just from 9-5, and are willing to make small loans or advances under $1,000 on the spot, will this industry disappear. We don’t see that happening anytime soon.”, according to John LaRosa.  
 

About The Report

U.S. Alternative Financial Services Market , published in November 2020, is an independently researched “off-the-shelf” study.  The study is 211 pages in length, with 66 tables and 19 competitor profiles, and costs $1,995. It is also sold by individual chapters at lower cost.  John LaRosa is available for media interviews (call: 813-971-8080).  A free table of contents is available by mail, email or the Web.  Contact: Marketdata LLC, 7210 Wareham Drive, Tampa, FL  33647, or see www.marketdataenterprises.com. Marketdata studies are also available online via several commercial databases and resellers. A 32-page Overview summary of major findings is available for $99.

About Marketdata

Marketdata is a 40-year old market research publisher and consulting firm specializing in the analysis of service and healthcare sectors.

Contact Information

John S. LaRosa

Research Director

Marketdata LLC

(1) 8139718080

marketdataent@yahoo.com