This year, microfinance market participants in MA (lenders/brokers) will have to rebuild their business models to work online and issue longer loan terms in order to stay afloat. Only secured lending will be successfully developed in the offline segment. At the same time, the current bank borrowers will be massively attracted to lenders issuing payday loans Massachusetts.
According to a study by the analytical center, by the end of 2021, the total portfolio of payday loans may exceed 200 000 dollars for the first time. This will result in its increase by 37% at the end of this year and by 22% next year.
The research shows the following statistics: in 2021, the portfolio of offline small loans will decrease sharply – by 45% year—on-year), and online may increase by 18%, respectively. As a result, the total portfolio of short-term loans will decrease by 4% year-on-year. The entire growth of the portfolio will be determined by the segment of long-term loans — it will increase by 31% year-on-year. At the same time, offline will show an increase of only 13%, and online — 170% year-on-year.
In connection with such trends, the analysts predict the mass shutdown of small lending services in Massachusetts that issue loans to paycheck offline. At the moment there are over 500 companies on the US market operating exclusively in the segment of offline short-term loans. About 90% of them can leave the market already in 2022. No more than 10% of companies will be able to work in the long term.
According to financial experts, the main trends of the next year will develop in line with the large-scale reorientation of payday lenders to online business. Only organizations that can automate their business processes as much as possible and seriously modify scoring algorithms based on predictive analytics will be profitable in the new conditions.
In addition, it is obvious that next year the scoring systems will play a decisive role, so there will be a market process of formation of systemically significant companies in the market.
There is a very strong flow from offline lending to online. Experts expect that by the end of 2021, every second loan borrowed in the state will be issued online, and in 2022 the number of customers of online companies will grow at least twice – up to 13-14 million users.
At the same time, already in the second half of 2019-2020, they saw an increase in the average amount of the check. In the future, it will continue, as well as, according to the estimates, the reduction of the gap in terms of the amount and terms of conditions between short and long loans will continue.
At the same time, a significant number of long-term loans from payday lenders will be received by citizens who were previously focused on banking products. This is due to the slowdown in lending in the banking sector: the growth rate of the bank loan portfolio will be about 18% by the end of this year, and next year it may slow down to 10%.
According to experts, the continued growth of the payday lending market in the USA, in general and Massachusetts, respectively is explained by the high demand for credit products in the conditions of stagnation of real disposable incomes of the population for 5 years in a row.
At the same time, the marginal rates on payday loans, which showed a decrease in 2019 from more than 800% per annum to 365%, will not continue to fall. On the contrary, due to significant demand, microloans for a period of two to 6 months may rise in price next year from the current 1-2% per day.