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 times 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 is 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.
The economy is relatively strong, which influences the business of payday companies in a good way – much lesser number of defaults, majority of the loans are being paid back. Such a positive climate has influenced the increasing competition in the field. More lending companies are opening up, 1-2 every quarter. While some claiming to be something different than payday lenders to differentiate themselves from the competitors, they are basically all the same.
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 (data from SimilarWeb):
- 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 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 not 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:
They have the least bounce rate and lower advertising spend. Their advantage is the known brands and the loyal customers, who visit them directly.
On the other side we have:
All are spending considerable amount of money on advertising.
To know, which of the strategies is more worth it we need to know the LTV of their clients to make a proper comparison. Nonetheless, I hope this little research will still be interesting to the marketers and people in the lending industry.