Financial Projections

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APRO along with RTO public companies, independent research and equity research firms set a statistical framework to provide a financial projection for the growth of the RTO industry in the U.S. for the next several years.

Here are some of the findings:

The average revenue growth for the RTO industry up to 2008 was from $100 – $200 million per year. Since 2008, revenue growth has been $400 – $600 million per year. The economy and credit collapse being the most significant factors in the recent growth. Wall Street analysts and economics indicate those same macro economic factors exist today and will remain for the next several years.

Several other socio-economic factors also exist that show enormous growth for the RTO industry. Especially those companies who can best capitalize on the dynamic trends in the retail marketplace and consumer perceptions regarding the rent-to-own industry and other underbanked options.

According to the U.S. Census Bureau, more than 50 million Americans fit the RTO demographic. The industry is currently serving 4 million customers. Since 1997, APRO has conducted RTO Customer Satisfaction Surveys and Potential Customer surveys to gauge both the current climate of customer satisfaction and to gauge the potential customer that fits the RTO demographic but does not RTO.

The following are some statistics regarding the current climate for future market penetration for additional RTO customers.

The lack of distinction across income levels, home ownership and marital status may be reflective of the economic climate which is impacting lower and middle household incomes.*

Younger participants were more interested in renting-to-own than older, particularly ages 18-24 (37% interest vs. 17% interest among 45-54 year olds.)*

Hispanics in particular tended to be positive, more hesitant to express negatives and concerns about rent-to-own. They were quick to rationalize and approve of others use of rent to own stores.*

Reasons for more positive image of rent-to-own included: the current economy/hard times (25%), better product quality/selection (25%), publicity/advertising (18%), increased usage/growing (14%), and staff is nicer/helpful (19%).*

The impact of the current economy is evident, as this was the first year of interviewing where mentions were made of the economy impacting perceptions of rent-to-own (regardless of their interest rating in renting-to-own).*

Millennials from higher income groups are increasing their use of rent-to-own stores – 15 percent of respondents making less than $25,000 and 17 percent of those who earn $50,000-$74,999 reported using rent-to-own stores.** That is an increase of 14% of general income levels for current RTO customers surveyed in 2009.***

*Trenholm Potential Customer Research Survey 2010 and 2011 Focus Group Observations.

**Think Finance Survey of Underbanked Millennials

*** America’s Research Group survey of current RTO customers.

Those RTO companies that can effectively communicate all of the benefits of RTO especially in this economy will have a greater advantage of increasing their customer base.

The extreme negativity toward rent-to-own and price gouging and preying on the disadvantaged heard previously (particularly in 1997) had softened, and participants tended to be more accepting of the rent-to-own practices and the need for rent-to-own, particularly with today’s economy.*

To improve the image of rent-to-own and increase trial and repeat usage, educating consumers about the benefits of rent-to-own and how it operates are essential. Educating potential consumers removes a wall/a barrier to renting-to-own. It should reduce suspicion, and increase understanding.*

From both the telephone survey and focus groups, we continue to see that even rent-to-own customers can be confused and do not fully understand the process and the benefits. The rent-to-own image can be enhanced simply by increasing understanding of rent-to-own, the benefits, and correcting misperceptions.*

The basics of renting-to-own and the benefits should be communicated in advertising, and supported by detailed information on websites, in-store collateral, videos and knowledgeable/educating sales staff. Focus groups have demonstrated how the image and interest in rent-to-own can be significantly enhanced simply by increasing understanding and correcting misperceptions.*

Millennials Use Alternative Financial Services Regardless of their Income Level
Think Finance Survey Finds Young Americans are Satisfied with Emergency Cash Products

May 17, 2012

FORT WORTH, Texas – May 17, 2012 – A new survey of underbanked Millennials – 18-34 year olds who supplement their bank accounts with alternative financial services such as prepaid debit cards or check cashing – challenges the stereotype of alternative financial service users as the poorest members of society who are forced to turn to alternative products. The survey found that underbanked Millennials with mid – high levels of income are using alternative financial services at rates similar to, and in some cases higher than, their lower-income peers. The survey also found that the majority of Millennials who reported using payday loans and other forms of emergency cash are satisfied with the experience of using these products and consider them an important financial tool.

The study, released by Think Finance, a developer of next-generation online financial products, surveyed 640 Millennials who have used some type of alternative financial services product within the last year and earn less than $75,000 in annual income.

The survey found that several alternative financial products were used at similar rates regardless of income level, debunking the myth that only the poorest rely on alternative financial services. Millennial respondents with annual incomes significantly higher than the national median of $39,945 (U.S. Dept. of Commerce, Bureau of Economic Analysis) reported using alternative financial services at rates similar to peers who earn well below the national median. Products and services used at similar rates by Millennials at both the higher and lower ends of the income range include:

  • Prepaid debit cards – 51 percent of those making less than $25,000 in annual income reported using prepaid debit cards within the last year. The percentage was the same for those who earned $50,000-$74,999.
  • Check cashing services – 34 percent of respondents who earn less than $25,000 reported using check cashing services, while almost as many in the $50,000 – $74,999 range (29 percent) turned to check cashers.
  • Rent-to-own stores – 15 percent of respondents making less than $25,000 and 17 percent of those who earn $50,000-$74,999 reported using rent-to-own stores.
  • Pawn shops – 29 percent of respondents who earn less than $25,000 reported using pawn shops compared to 21 percent of respondents making $50,000 – $74,999.

Surprisingly, some of the alternative products that showed significant differences in usage across income level were more heavily used by mid – high income respondents than low income respondents. These products include:

  • Emergency cash products – Usage of payday loans, cash advance and other emergency cash products was higher among people making $50,000-$74,999 (22 percent) than those who earn less than $25,000 (15 percent).
  • Overdraft protection – 58 percent of respondents making $50,000-$74,999 reported using overdraft protection compared with 31 percent making less than $25,000.
  • Bank direct deposit advance – 37 percent of respondents who earn $50,000-$74,999 reported using bank direct deposit advance compared with 22 percent of respondents who earn less than $25,000.
  • Money transfer service – 39 percent of respondents who earn $50,000-$74,999 used money transfer services within the last year compared with 29 percent of those who earn less than $25,000.

“Stereotypes that paint users of alternative financial products as poor and uninformed are simply not accurate,” said Ken Rees, CEO of Think Finance. “This study confirms that young people across the spectrum have a need for the convenience, utility and flexibility that alternative financial services provide.”

Millennials satisfied with emergency cash products

Sixty-two percent of Millennial respondents who use emergency cash products said they consider the products to be extremely, very or somewhat important. A significant majority (83 percent) of respondents who use emergency cash products had a positive or neutral experience with 21 percent describing themselves as extremely satisfied, 34 percent describing themselves as somewhat satisfied and 28 percent saying the experience was neutral. Alternatively, 37 percent of survey respondents reported having had a bad experience with their bank at some point.

“In an ideal world, cars wouldn’t break down, pets would never get sick and everyone would have a fully-funded emergency account,” Rees said. “Unfortunately, that is not reality and Millennials, many of whom are managing high student loan debt loads, may find themselves in need of emergency cash solutions. It is gratifying to know that on the whole, Millennials are able to find solutions that help get them through tough times”.


About Think Finance

Think Finance is a leading developer of next-generation financial products for underbanked consumers.  The company’s products provide increased convenience, transparency and value to the millions of consumers whose needs are not being met by traditional banking products. Think Finance is privately held, with offices in Fort Worth, Texas and the United Kingdom, and is backed by some of Silicon Valley’s most respected venture capital firms including Sequoia Capital and Technology Crossover Ventures.


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