A payday loan (also called a payday advance, salary loan, payroll loan, small dollar loan, short term, cash advance loan or SMS loan) is a small, short-term unsecured loan. The typical sums provided by the lenders range from 100€ to 1000€.
In Estonia this type of business has had a relatively long history. The first companies in the field started to form in the ages of economic boom more than 7-8 years ago. The ease of getting such a loan and aggressive advertising campaigns made such loans very popular among the working people. They saw such loans as an easy immediate fix to their financial needs and didn’t think about the 400-700% yearly interest rates. The problems began, when the economical situation changed in the 2008 and over 15,000 people were having trouble repaying their loans back. A number of legislation act were taken to protect the borrowers.
Today the situation is much different than of 6 years ago. The economy is relatively strong, which influences the business of payday companies in the good way – majority of the loans are being paid back. Such a positive climate has influenced the increasing competition in the field. More and more lending companies are opening up, 1-2 every month. While some claiming to be something different than payday lenders to differentiate themselves from the competitors, they are basically all the same more or less.
So, how do the different companies compare with each other? The best way to measure would be to compare the websites of each of the lenders. The results are presented below (all the data is estimated):
Direct – meaning the direct traffic to the website. The high number of direct visitors indicates the higher level of branding and big number of returning visitors.
Referrals – here are included all the links in directories, as well as ads on big publisher websites (Delfi, AP, Õhtuleht, etc.).
Search – traffic from the search engines (Google mainly).
Social – traffic from social networks, both free and paid.
Mail – traffic from email clicks.
Display – traffic from Google Display network.
What can be easily seen from the above table there is a clear relationship between the paid ads (referrals and display) and the bounce rate (a person leaves website after visiting the landing page). This could be interpreted in two ways – either the landing pages are being well optimized for the traffic they receive or this is a low quality traffic.
Considering that a lot of these companies are using pop-up ads, I would suggest a lot of visits are done by mistake, resulting in bigger bounce rate.
Companies relying more on direct traffic and search traffic are able to keep their visitors more engaged, they have the lowest bounce rate and highest engagement level from their visitors. On a negative side, their traffic is also the lowest, compared with companies investing heavily in paid ads.
The payday lenders with the most engaged audience and the lowest number of paid ad spend are the following: Creditinvest.ee, Ekspressraha.ee, Bestcredit.ee, Credit.ee, Raha24.ee and SMSLaen.ee
They have the least bounce rate and much lower advertising spend. Their advantage is the known brand and the loyal customers, who prefer visiting the lenders directly.
On the other side we have Kiirlaenud.ee, Laen.ee, SMSMoney.ee, Credit24.ee, Ferratum.ee and Vivus.ee, all spending considerable amount of money on advertising and getting people to signup based on quantity rather than quality of incoming traffic.
To know, which strategy is more worth it is needed to know the conversion rate of each of these lenders and the average conversion rate in the industry to make a proper comparison. Nonetheless, this data would be interesting to the people in the lending industry, as it helps to compare competitors and make make relevant marketing decisions.