What Is a Consumer Finance Company and Should You Start One?

what is a consumer finance company start one

Fintech has flourished in the last decade, and one of the reasons for it may be lingering distrust in big banks. Customers dislike the endless fees, and they’re not sure the banks will manage their money the right way. 

Instead, many people have turned to consumer finance companies. While consumer finance isn’t a new concept, many of the new companies are being powered by the fintech revolution. 

What is a consumer finance company anyway, and does it make sense to start one? If you’ve got a good idea for a finance startup business, it could be a great plan. 

Defining Consumer Finance Companies 

So, what is a consumer finance company exactly? The simplest definition is it’s a non-bank lender. 

Consumer finance companies don’t receive deposits, unlike banks. That means you don’t make investments with them, and you can’t deposit your paycheck there. 

If they don’t receive deposits, what does a consumer finance company do? 

These kinds of companies offer loans to consumers. With the advent of fintech and the Internet, consumer finance has experienced a boom. 

Answering “What Is a Consumer Finance Company” in the Fintech Era 

Consumer finance has been popular for a long time. There were many companies founded at the outset of the PC revolution to put finance back in the hands of individual. 

Today, fintech is driving this initiative forward even more. New technologies have made it possible to offer online loans. Lenders can use AI to automate approvals, letting people access loans anytime, anywhere. 

E-transfers make it possible to get cash fast too. Some platforms even allow for cross-border banking. 

Another innovation enabled by tech has been peer-to-peer lending. P2P networks let anyone who has a little bit of capital make loans to their peers who are looking for loans. 

This can be a great option for people who can’t find financing through traditional lenders. 

Right alongside these developments has been the advent of microfinancing. Lenders offer small loans to those who need them. The funds can help people start businesses or get back on their feet. 

Should You Start a Consumer Finance Company? 

Fintech has provided a revolution in consumer finance, but it’s also led to plenty of startups. As a result, the consumer finance landscape is now looking much more crowded than it did a few years ago. 

That doesn’t mean there aren’t opportunities for those with a little bit of capital and a unique vision. An example is solar loan provider Loanpal. The company could be like every other consumer finance venture, but it’s focused on a growing niche instead. 

Stories like this suggest there are still plenty of opportunities. You can serve unique markets with consumer finance company loan options. 

A Smart Investment 

You asked, “What is a consumer finance company?” and now you have the answer. You also know a little bit about the market and how it’s changed in recent years. 

If you have a unique idea to help people get access to the funds they need, then starting a consumer credit finance company could be a fantastic idea. 

Looking for more business advice and startup ideas? There are plenty of insights in our Frugal Finance archives on the Bootstrap Business Blog. Your next great consumer finance idea might be just a click away.

Bootstrap Business Blog Newest Posts From Mike Schiemer, Partners, & Blog Outreach Services