The crisis revives microlending and microcredits solutions
Consumer credit production has grown strongly over the past 10 years, with a notable acceleration since 2015 to reach a pre-crisis record of more than €67bn.
The year 2020 marked a halt to this growth dynamic. The first containment and the second wave effect, combined with a fall in confidence and a fall in consumption, led to two significant falls in credit production.
Faced with an unfavorable economic context (low interest rates, increased risk of solvency default), the traditional credit players must renew themselves and offer themselves new growth opportunities.
The crisis has accelerated the use of payment facilities such as split payment. For the consumer, the split payment has become a judicious solution (budget management), an alternative to the bank overdraft, and above all simple and immediate.
The other innovative solution concerns microloans or microcredits. Microcredits are loans of up to 1,000 euros with a duration of less than three months.
The microloan: a way to access small credits.
Microloans or microcredits are a consequence of the opening of financial flows allowed by Open Banking and the changing needs of consumers in terms of credit and financial services. They can take different forms, but are originally designed for people who are financially fragile or who wish to benefit from a loan outside the traditional banking system.
The microloan responds to the needs of certain people who see their request refused by banks or traditional organizations. Of a variable amount but never excessive, the microloan is finally a help allowing individuals who are financially unstable at a given moment to benefit from funds.
In France, a certain number of criteria must be met to be eligible for these types of credits. Microcredit is a solution that is characterized by its alternative aspect to the traditional finance and banking system.
There is a type of microcredit with a social vocation, which cannot be granted completely freely. Two elements are necessary to put together a micro-credit application:
- This file must be prepared in collaboration with a social worker
- The file must present a coherent objective, motivated by real social needs (professional integration, access to housing, help with driving licenses in certain regions…)
Beyond this proposal of microcredits for these rather extreme cases, many companies offer online credits accessible to all. After filling out a relatively short application allowing these companies to evaluate the « health » of your bank account, it will be possible for you to access microloans.
An attractive market for fintechs
For example, the Bling app offers microcredits of €25 to €100 sent in 3 business days (or instantly for €7), which will be recovered by Bling when the user receives their next income.
Bling is a great example of the importance of user experience in service offerings. Registration is extremely fast and entirely digital, requiring no proof of eligibility for the service. The application will automatically recognize your ability to repay, indicating the amount of the advance you can benefit from.
Cashper offers a similar microloan service, for amounts between 50 and 1000€ for regular clients (150€ maximum for new clients). With its « Coup de pouce » offer, Floa proposes a range of microloans with a simplified application process and instantaneous release of funds.
Other models are more original, such as Moneybounce, which allows individuals to grant mini-credits to students. In this case, the start-up operates as a simple intermediary between lenders and borrowers.
The risks inherent in these new offers
These credits escape the law on credit because they are very small credits: insofar as it is less than 3 months and less than 1.000 euros.
The problem with these new services is the transparency of the tariffs and other rates involved in these operations. After taking out a loan, the consumer is faced with a difficult choice: « either they wait 14 days before taking out the loan, and the advance is free or limited, or they ask for it immediately, and « the bill usually goes through the roof. According to Bling, 80% of their customers use the express formula in order to benefit from the advances instantly.
The most precarious targeted
According to UFC-Que Choisir, « apart from Cashper, none of these companies bother to warn Internet users about the risk of not repaying a loan », which is what banks are required to do for real estate or consumer loans. Such a pitfall is all the more serious as they particularly target the most precarious (fixed-term contracts, young people, people registered with the Banque de France, etc.).