WILMINGTON, N.C.-CUs are ignoring a $56-billion lending opportunity, one analyst contends.
That is the size of the market for small-dollar, short-term automated loans that companies such as BillFloat and BillMeLater are targeting, noted Bob Giltner, chief DDA strategist for Velocity Solutions. "This market has typically been the realm of payday lenders and now non-bank competitors such as PayPal are having great success with it."
The new online automated lenders are doing more than chipping away in the payday loan market with prices often lower than the check-cashers, said Giltner. "They are offering this service in a highly efficient manner, which is cutting their costs and making it much simpler for consumers to use their service. People don't have to stop by an office and fill out papers. It's very convenient."
Giltner noted the consumer appeal of these new lenders, pointing out that BillFloat entered the market last year and quickly reached 150,000 hits a day. Giltner contended there is growing consumer demand for small-dollar automated lending due to the large number of monthly bills households pay and because the economy has forced many more Americans to live paycheck-to-paycheck.
"With the growth of the Internet we are advancing toward many different payment methods, as opposed to an accounts-based world that leverages cash," observed Giltner. "The No. 1 credit union lending initiative in 2012 should be to understand this emerging opportunity in small-dollar, short-term loans they can provide in an automated way."
Giltner suggested CUs visit BillFloat's website to gain an understanding of how the lender approaches the market and prices its services. Giltner said BillFloat charges as little as $4.99 for a loan of a few hundred dollars at a 3% interest rate for 30 days.
