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A Billion Revolution in Motion
The industry of installment loans, which was traditionally controlled by small stores and regional competitors, is currently undergoing the most significant upheaval it has seen in decades. According to data provided by PitchBook, the amount of merger and acquisition activity in the alternative financing sector reached $12.3 billion specifically in the year 2024. This represents a 45% increase from the previous year. It is also profoundly altering the method in which Americans borrow money during times when traditional banks refuse to lend them money.
If there were 500 independent providers of installment loans just five years ago, there are now fewer than 200 of them operating today. The acquisition of OnDeck Capital by Enova International for $1.8 billion and the strategic merger between LendingClub and Radius Bank have both resulted in the creation of lending behemoths that now dominate more than sixty percent of the market for online installment loans.
The Digital Disruption Factor
Technology as the Great Accelerator
The reason for this wave of consolidation is simple: technology is too costly for smaller lenders to sustain competitively. Over the past decade, investment in modern loan origination systems, AI-powered underwriting algorithms, and regulatory compliance platforms has regularly exceeded $10 million a year.
This technological imperative has formed surprising alliances. While ACE Cash Express and other traditional payday lenders have strategically merged with fintech platforms, others have taken on the pressures of market consolidation and expanded their BestUSAPayday’s eLoanWarehouse service to offer loans from $100 to $5000. Even the more established players like CashNetUSA and Check Into Cash have been on the acquisition trail, acquiring smaller regional lenders seeking to build their market presence online.
The Regulatory Catalyst
The regulatory landscape has grown more fragmented and confusing than ever, with no fewer than 36 states introducing new lending regulations since 2022. The patch-line of laws has made national businesses impossible for smaller companies. The Consumer Financial Protection Bureau (CFPB) has suggested a rule for small-dollar lending, which is expected to be implemented in 2026. However, this rule would also generate complexity, which is responsible for the increased number of mergers that are occurring.
Winners, Losers, and the Borrower
The Consolidation Paradox
The average annual percentage rates (APRs) of post-merger businesses often decrease by 15-20% during the first year, according to data from the industry. Larger lenders are able to offer more competitive rates. In addition to this, they provide mobile applications that are more advanced, shorter approval processes, and improved infrastructure for customer service. That means there will be fewer competitors, less innovation and access for high-risk borrowers.
Jonathan Reed, Founder & CEO at BestUSAPayday.com says, “Consolidation has forced us to innovate differently. While mega-lenders are more concerned with volume, we have increased our emphasis on providing customized service and establishing partnerships with specialized lenders that are familiar with the specific circumstances of individual borrowers. In a sector that is becoming increasingly subject to automation, the human aspect becomes our significant competitive edge.”
The Rise of Super-Lenders
There have been three “super-lenders” that have formed as a result of the wave of consolidation: Enova International, which controls 22% of the market share, Elevate Credit (18%), and CURO Group (15%). Organizations now process more than ten million loan applications on a monthly basis. They do this by employing machine learning models that assess more than ten thousand data points for each application.
Traditional financial institutions are now getting involved, which is an interesting development. It is clear that major banks are beginning to grasp the lucrative potential of the installment loan sector. This is especially concerning given the fact that younger people are increasingly favoring these products over credit cards.
A recent study by the Federal Reserve found that lenders that are backed by foreign investment are now responsible for 28% of online installment loans in the U.S. — a steep rise from 8% just in 2020. Such foreign capital and capability lead to the heightened competition among the domestic lenders and drives them towards consolidating for defensive reaction.
Looking Ahead: The Next Wave
Artificial Intelligence and the Future of Lending
However, the next wave of consolidation will probably be fueled by AI functionality. A company with superior AI can approve loans in less than 60 seconds with an accuracy of 94%, which would be impossible with any unemployment data sets and require huge data to larger consolidated entities.
Just fifty large competitors would control ninety percent of the market for installment loans by the year 2027, according to forecasts made by the industry. This is in contrast to the hundreds of providers that existed ten years ago. Concerning market competition, consumer choice, and regulatory control, this concentration presents critical problems that need to be addressed.
The Regulatory Response
The authorities are starting to look into these mega-mergers with a greater degree of scrutiny. The recent examination conducted by the Department of Justice over the proposed merger of MoneyLion and Even Financial, which is estimated to be worth $2.1 billion, indicates that there may be opposition to unbridled consolidation. The states of California, New York, and Illinois have come together to form a coalition with the purpose of investigating whether or not consolidation is restricting access to credit for communities that are underserved.
Navigating the New Normal
The consolidation within the installment loan industry signals more than just corporate arranging — it’s changing how countless Americans get to credit when crises hit. The new merged entities are tech-savvy and they have additional cost efficiencies leading to lower rates, but the lost smaller lenders who focused on communities cannot be replaced by technology.
As the industry continues to consolidate, preserving a wide array of lending options from the familiar traditional lenders such as Advance America and LendUp, becomes critical to ensuring that all Americans will have access to affordable and transparent lending options.