New Online Lenders Alliance Research Demonstrates that Consumers Rely on More Options for Credit – Banks, Credit Unions, and Alternative Lenders

-Demand for Credit Continues to Rise with Consumers Seeking Mainstream and Alternative Lenders Alike-

ARLINGTON, Va. (September 11, 2024)—New survey data released today by the Online Lenders Alliance finds that bank customers and credit union members continue to rely on alternative financial services for small dollar credit. This suggests that while opponents of alternative lending products claim that banks and credit unions can fully meet consumers’ small dollar credit needs, consumers’ real-world financial decision-making indicates otherwise.

Data continues to point to American consumers seeking more credit:

• U.S. Banks reported the highest loan demand over the last two years and credit card debt is reaching record levels, demonstrating that the demand for credit continues to increase. Despite this strong demand, many mainstream financial institutions like banks and credit unions are tightening or planning to tighten their underwriting and reducing credit access due to future economic uncertainty.
• Consumers are increasingly turning to alternative credit, highlighting their desire for more credit options, according to Experian’s Clarity Services.
  • Installment lending, which has seen its dollar volume roughly double between 2019 and 2023, currently encompasses 43 percent of the alternative lending sector.
  • Other forms of alternative lending also grew, with lines of credit growing by more than 600 percent over the last five years and secured installment loans growing by more than 300 percent.
  • Nearly every state in the nation saw an increase in the number of users of alternative credit from 2022 to 2023. Tennessee and New Jersey both experienced the largest increases with only Maine and New Mexico (which recently implemented an interest rate cap on January 1, 2023) experiencing declines.

To better understand where consumers are seeking credit options, OLA surveyed five large installment lenders to see how many of their customers in the first quarter of 2024—representing more than 1.4 million customers—had primary accounts at banks or credit unions. This demonstrates that those using alternative credit are not simply the “unbanked.”

According to the survey, 77.8 percent of the alternative lenders’ customers had accounts at banks, and another 22.2 percent had accounts at credit unions. In addition, 27.4 percent of customers using a small dollar online installment loan in the first quarter of 2024 were also customers of one of the six largest banks reportedly offering small-dollar loans (Regions Bank, Truist, Wells Fargo, Bank of America, Huntington Bank, and U.S. Bank).

“Overall, the data clearly shows that consumers are seeking more credit and more credit options,” said Andrew Duke, Chief Executive Officer of the Online Lenders Alliance. “Within our financial ecosystem, banks, credit unions, and alternative financial service providers all play an important role in meeting that demand.”

“Furthermore, we can see from the data that a considerable percentage of consumers with active accounts at banks and credit unions offering small dollar loans bypass the offerings at those institutions and use fintech lenders to meet their credit needs,” Duke continued. “In fact, our data finds that nearly half of the customers using a small dollar installment loan in the first quarter of this year also had an account at a credit union or one of the six banks routinely cited as offering small dollar credit. While there are likely differing reasons why consumers use a mix of traditional and alternative financial providers, the data shows that they are actively seeking and explicitly choosing to use more options in their financial decision-making.”

A breakdown of the survey data is below:

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