Pawnshops ~ A Resurgent Financial Service...

I've long been fascinated with financial service innovations. For instance, the peer-to-peer CircleLending venture founded by Asheesh Advani (now Virgin Money USA). In the developing world context, certainly much has been made of microcredit and microfinance innovations, for instance, Compartamos and Kiva. But variations on this theme are among the oldest financial services we know of, most especially Pawnshops, a lending institution that's more vital than ever. In today's WSJournal, Gary Fields writes People Pulling Up to Pawnshops Today Are Driving Cadillacs and BMWs. And this boom of pawnshops is not just a recent phenomenon as Richard Phalon wrote in his 2004 Forbes article Stake A Claim To Pawnshops. Phalon described it well when he wrote about the then three biggest publicly owned pawn chains Cash America International, EZCorp, and First Cash Financial Services...

"With fewer than 1,000 shops among them, the three have plenty of room to grow. They are a critical mass in a fragmented industry of some 10,000 to 12,000 outlets total, run mainly by mom-and-pop operatives with only tenuous links to an IT world. It's a preserve ripe for the sort of rollup that has brought the efficiencies of centralized management to a yellow book of other specialized retailers -- pizza joints, coffee shops, bookstores -- you name it. The strategies are familiar, too: Buy up existing outlets, open new ones, shut down losers, gussy up the marginal, and juice unit gross and margins by pumping huge amounts of cash into promising new products like short-term advance "pay day" loans..."

There's tremendous room here for additional transformations, including more peer-to-peer investment structures, ICT-improved efficiencies, lower-cost remittances and money transfers, bankless banking, and more. Stay tuned!