Los Angeles, CA (Vocus) September 9, 2010
Over the last decade those in the Payday Lending business here in the United States have witnessed both good and bad times. During the early to mid 90s, the payday loan industry saw a steady increase in business and profits, and very little regulation. By the year 2000 and beyond, legislation overseeing this “cash advance” loan product was getting tighter and tighter, forcing many online lenders out of business or out of certain States, due to legislation. Now, with payday loans booming in the U.K., many online lenders are turning to the U.K. in order to secure the future of their lending business.
A payday loan, which is generally described as a short-term loan between approximately $100-$1,500, usually set to be paid back on the borrowers next pay date, can be offered through a store-front or an internet website. In the U.S. the demand for these loans has steadily increased although the regulations overseeing these loans have pushed many lenders out of business, leaving consumers without an option in the absence of the payday loan product.
Although payday lenders are being pushed out of several States in America, the loans they offer are becoming very popular in the United Kingdom. Reports from debt free U.K. recently reported that the number of customers utilizing these loans have quadrupled in the last 4 years to 1.2 million. The report also mentions that the majority of payday loan customers are happy with the service, many of which use their loan to avoid other and more costly bank fees.
But American payday lenders must face a rather difficult business decision when considering offering their loans to an international market. Even with online lenders, who have the benefit of offering loans in the form of a “digital storefront” as opposed to the cost of setting up a physical store-front to offer loans to different areas, the cost of offering loans to an international customer base can be both costly and risky. For example, the software used to offer online loans and the other processes integrated with the software, can prove very costly to setup initially.
Payday lending is like any other business, meaning you should be able to justify any large and costly decisions with prospective costs and earnings, similar to an initial business plan. In this respect, justifying a shift to offering loans to another continent can prove to be risky on paper. Between the cost of upgrading (if even possible) software or switching providers, as well as legal council to ensure your business is adhering to new international lending rules and regulations, there is usually not enough information to make a decision to push a lending business overseas. But despite these factors, many lenders are making the choice to offer loans internationally.
At this point, Pay1Day will continue to offer advance loans to States in America where lending is still legal and profitable. In the meanwhile, Pay1Day as well as many other online lenders will certainly keep an eye and an ear to the U.K. for more information about lending there. Perhaps the future of the payday lending industry will be beyond America’s borders.