Cash Connection Case

Cash Connection: Are Its Payday Lender Strategy and Its Business Model Ethical?

Poor economy had led to a boom in payday advance lending services. These services provide fast cash or short-term loans for America’s working and middle class population. The pay loan industry began to grow in 1990 due to consumer demand and to significant economic changes. As of today there are more than 22000 payday advance locations estimated in the US which extend about $40 billion in short-term credit each year. In comparison there are only 9500 banks spread throughout the country.

Cash Connection was founded by Allen Frank and first started to provide check-cashing services. In addition the company offered bill payment services, prepaid phone cards, and money orders. In the mid-90s Cash Connection became one of the biggest competitors in short-term cash landing industry. A key to success was to provide fast cash to people who have unstable relationships with banks and other financial institutions.

The company’s strategy is

- to provide short-tern cash loans and services to the “unbanked” individuals (those who don’t have a bank account) and “underbanked” (those who had poor access to financial services). The borrowed cash loans are expected to be repaid on the individual’s next payday.

-distinguish themselves from other competitors

Cash Connection pursues a broad differentiation strategy. The company looks for new ideas and services to differentiate itself in a competitive market.

Key success factors:

1. High need for service. The ability to receive cash in emergency situations was especially important during a time of economic trouble.

2. Convenience. Payday loans are quick and easy way to receive cash for 2-4 weeks. All the customer need is a job and a bank account.

3. Reputation. Cash Connection was one of the first companies who started to offer their services in the country. They earned a solid reputation and a loyalty among customers.

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