Home Depot Loan
Recent news found that as banks are still lending at tight rates since the Great Recession, retail stores are stepping in to lend. As the shadow banking industry is likely to continue this practice, risk management software is becoming increasingly relevant to retailers processing loans of clients who may not otherwise be qualified by regulated banks, regardless of the recent tightened lending.
According to a New York Times article, retail stores like Costco and Sam’s Club are offering business loans, and Home Depot offers clients loans intended for home renovations.
Besides providing loans to those banks are still hesitant to lend to, retailers are reaching out to the underbanked and unbanked population. The population of people using few or no services from banks has grown from 9 million three years ago to 10 million this year.
Walmart in particular has a large underbanked clientele – about 25 percent of people who shop at Walmart are underbanked. While not offering loans, Walmart has created prepaid cards for people, unbanked or not, to withdraw cash from ATMs and reload.
Home Depot has different motivations for creating loans, as home constructions have taken a serious downturn as a result in the housing market crash in 2008. While the intention was for emergency house-related repairs, customers were also using the loans for home decorating projects.
Retailers, such as Office Depot and Sam’s Club, are instead offering loans through the Small Business Administration as opposed to creating their own. Still, these are often less intense applications and qualifications than a regulated bank – further emphasizing the need for lenders of the shadow banking industry to use tools to prevent unqualified lenders when processing loan applications.