The past year has been very rough on our economy, and there have been very few segments of our population that have not been affected in some way. One of the worse results of this recession has been the loss of credit to all industries and segments of our society. This certainly negates the financial options that some of us may have taken advantage of in the past.
The low income and credit challenged groups have been dealing with this for years, so they are very well versed in the Alternative Financial Services that are available. When we speak of Alternative Financial Services we are talking about businesses that you do financial transactions with out side of the typical banking and lending institutions. Some examples of these are check cashing outlets, pawn shops, rent to own firms, and payday lenders.
With the loss of traditional credit it will be interesting to see if more of consumers with modest means will also start to turn to these providers as well. As credit dries up and many more people are financially hurt by unemployment, reduced hours or pay, and the inability to adequately pay their current debts, this may create an interesting conclusion. Many people who would normally use traditional financial services may have to find alternatives because their financial status is dropping along with their credit scores and incomes.
The big winner in all of this could be the payday loan industry and payday lenders which happens to be the fastest growing segment in the alternative financial markets. The industry has already been consolidating, as is evidenced by the growth of large companies. Many of the largest of the payday lenders today are publically traded companies. It will be interesting to watch as many governments and advocates are trying to ad regulation, will the recession and its consequences actually make the payday loan industry more profitable, and powerful.
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