Should I get a payday loan online or offline?
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UPDATED: Aug 14, 2013
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Due to convenience, ease, risk, and accessibility, prospective borrowers may find it more convenient to get a payday loan online rather than through a store.
While most every city has a payday loan store (where they’re legal), that does not mean that they are the best option for prospective borrowers who are in need of quick short-term loans.
Think of it this way: Just because a gas station is nearby, that doesn’t mean that that particular location is the right choice to buy gas from. This is especially true if there is a gas station a bit further away that offers a cheaper product. Discerning between where to spend money can actually end up saving money.
The three main reasons that someone would want to get money online versus offline are safety, convenience, and growth.
Ecommerce and financial industry experts chimed in to explain each of these factors and what they mean for indecisive consumers contemplating from where to borrow their next payday loan.
Internet Safety and Security
The internet is now the bastion of global commerce. The financial titans of industry use it to safely and securely trade stocks, utilize financial instruments, and even to service personal banking needs.
Financial companies devote significant resources to encryption and identity checks, all with the goal of allowing for private and secure transactions from verified customers. As a result, online financial security is incredibly safe and robust, and only growing stronger with each passing day.
Many of the same security programs used by banks and major corporations are also used by payday loan lenders. One could even make the argument that borrowing a payday loan is twice as secure as a bank transaction since a customer would be protected by the safeguards of the payday loan company on top of the safeguards of their bank when the lender accesses the customer’s online checking account. That entire transaction is dealing with two financial companies with two online safeguards.
While companies actively protect their customers to the fullest extent of their abilities, customers themselves need to take responsibility for watching out for their own safety.
Jon Lal, the founder of BeFrugal, told loans.org that there are a number of things that consumers and prospective payday loan borrowers should look for prior to submitting their financial information online.
“First make sure that the site uses a secure encrypted connection,” he said. “Second, look for a reputable security seal (e.g. McAfee SECURE and TRUSTe) and click on it to verify its validity.”
To check for a secure encrypted connection, you should pay attention to the URL address bar of the lending website you’re on. If the URL of the website begins with “https” then that means the site is secure (normal websites simply have http, whereas that additional “s” stands for secure).
Some websites will also display a green visual in the URL address bar as an extra sign of security. Those using the web browser Internet Explorer may see a green bar right before the website’s URL. Chrome and Firefox users may see a green padlock.
But some security precautions can be taken long before consumers even make it a lender’s page.
Be wary of any suspicious emails that you receive, especially when those emails are unsolicited or come from payday loan lenders that request additional information after you’ve already taken out money. Of course, when in doubt borrowers should always call and speak to a representative — but get the company’s phone number from the company’s website, not from the email sent to you.
Convenience and Online Growth
Maciej Fita, SEO Director for Brandignity, thinks the biggest benefit for consumers when it comes to online transactions is the speed at which they can get their needs met.
“People are busy and many don’t always have the time to hop up, get dressed and rush over to a brick and mortar location,” said Fita.
She pointed out how banking has made life much easier thanks to online tools and apps.
“There is just no reason for people to have to go into a branch unless they need more cash than the ATM limit will allow”, said Fita. “A person can now make a deposit right through their mobile app which is an amazing tool for those that value their time. The new customer experience is not with a teller, it is with an online dashboard.”
In fact, convenience is one of the reasons that online lending and ecommerce in general is booming, even for companies that deal with expensive tangible items.
Vanessa Stofenmacher, Creative Director and Co-Founder of Heirlume, told loans.org that jewelry ecommerce and online business is only growing.
“In our research, we found the fine jewelry market is a 40 billion dollar industry, which is currently 85 percent offline and 15 percent online,” she said. “The online percentage is expected to double by 2018 to 30 percent online.”
Now that shoppers are more savvy and comfortable online, Stofenmacher thinks that confidence can only increase.
The Benefits of Online Lenders
Simply put, the internet allows consumers to shop and compare millions of different products.
Finance is no different. Via the internet, consumers and prospective borrowers get to compare payday loan lenders’ prices, terms, and customer feedback. It is nearly impossible to compare these same things while inside the local payday loan store.
Since some borrowers also get payday loans for emergency needs, they benefit by choosing online over offline since the internet never sleeps, whereas the employees at a storefront lender must. This can be devastating for a person who needs quick cash on a weekend or after store hours.
And what’s more is that it’s not just borrowers and applicants who benefit from online services.
The online process actually saves lenders money, as Kelly Williams, Marketing and PR Coordinator for Gorilla Tango Inc., explained.
“Payment processors and banks are able to keep the transaction completely virtual when items are bought and sold online versus offline,” she said. “This saves them money and maintains the greatest level of accuracy in the transaction (which again saves money). Each time a transaction is made in the offline world there are multiple people involved which result in a higher per transaction cost and the possibility of human error.”
Since everyone has at least one horror story of a transaction that took too long in a store, it is easy to see how the less human involvement, the better the outcome for customers. In effect, the fewer moving parts, the better the customer experience.
Andy Price, Manager at 1000 T-shirts, told loans.org that even though his company sells shirts online, his business shares common characteristics with online lenders that simply make for better customer experiences.
“Purchasing a financial product or a t-shirt online allows you to optimize your time,” he said. “There is no need to displace yourself from home for something that can be brought or provided to you via the internet… On the same subject of time efficiency, it is important to take into consideration that if you go into the bank you’ll probably have to wait in line until your turn is up… Online purchases avoid these time consuming tasks.”
Adding icing to the cake is the fact that internet-based payday loan lenders are often much simpler and more straightforward than their physical counterparts. They don’t require applicants to handwrite and fill out forms or wait in line. Applicants simply enter in their information on digital payday loan applications and within seconds they know if they have been approved or rejected. This can be far quicker than a lengthy conversation with a person behind the counter of a payday loan store.
Consumers have noted the benefits of speed. They’ve rushed to favor doing their business online as Tom Bowen, a consultant at Web Site Optimizers, found with his inside knowledge of ecommerce.
“The amount of online commerce carried out in the US continues to grow, and is estimated to grow more than 10 percent annually for the next three years to become 10 percent of all retail sales, according to a Forrester Research study released in March of this year,” he said.
Bowen claims that the increase in tablet and smartphone sales will only spur on additional online transactions. By his estimates, 72 percent of tablet owners make a purchase from their tablet on a weekly basis while over half a billion tablets are expected to ship in 2013 and 2014 alone.
Even though older customers may prefer taking the time to go into a payday loan retail store to speak with someone face-to-face, the fact that most everyone will be online thanks to tablets and smartphones speaks volumes about the probability that the majority of future consumers will turn to the internet for payday loans.
While online payday loans are here to stay and have a broad range of benefits, there is one positive attribute that retail payday loan stores have over their internet counterparts.
The Advantage of Getting a Payday Loan in Person
Kimberli Schaefer, Vice President of Branch Operations at Generations Federal Credit Union, told loans.org that face-to-face relationships still hold some power. In fact, the relationship built up by in-person transactions can create customer loyalty.
“Brick and mortar branches allow for a presence in the community, which for credit unions is critical in our role as financial advocates within our respective communities,” she said. “It’s the community service touch if you will.”
Of course Schaefer was quick to admit that physical stores and buildings always have the high costs of overhead to deal with, such as employee pay, training, and other costs of doing business.
Despite the differences between online and storefront payday loan lenders, they both strive to provide necessary and quick financing for people with bad credit. As ecommerce and online payday loan lending continues to grow and develop, and as anti-payday loan voices continue to pressure the cash advance industry, in the future, online may very well be that the only place people will be able to find access to quick money.