CFSI Study: Payday Shrinks While Underserved Consumers Pay More for Auto Insurance

New Market Size Report from CFSI and Core Innovation Capital Reveals Financially Underserved Market Grew Nearly Six Percent in 2015 to Estimated $141 Billion

CHICAGO, IL--(Marketwired - Nov 17, 2016) - Today, the Center for Financial Services Innovation (CFSI) and Core Innovation Capital (Core) released their sixth annual Financially Underserved Market Size Study. The report, which benefited from the financial support and strategic input of Morgan Stanley and with additional financial support from CFSI'S Founding Partner the Ford Foundation, reveals that underserved American consumers spent $141 billion in fees and interest in 2015, generated from a volume of $1.6 trillion in financial activity. More information and visual assets are available at

The report provides a snapshot for how much underserved consumers spend on fees and interest to borrow, spend, save and plan their financial lives. The 2015 data highlights a number of notable trends, including the move away from storefront and online payday lenders, the growth in both consumer and small business marketplace lending, and the surprisingly high cost of auto insurance for underserved consumers.

"Even as financial providers embrace improved consumer financial health, a large percentage of Americans remain financially underserved -- a status that confers much higher financial costs," said Jennifer Tescher, President and CEO of CFSI. "This year's study reveals a shifting mix of marketplace trends and pressures driving those costs as an ever increasing percentage of total financial activity. In particular, auto insurance and subprime installment lending present enormous opportunity for financial providers and innovators."

The Market Size Study found that the overall volume of financial activity grew from $1.5 trillion in 2014 to $1.6 trillion in 2015, a rate of 4.3%, while spending on fees and interest increased by nearly six percent. For 2015, the study reveals the following key findings:

  • Marketplace Outpaces Payday: At 210% growth, personal Marketplace loans were the fastest-growing segment while online and storefront payday loans together fell the sharpest, reflecting 23% less spending by consumers. This fluctuation could be attributed to a shift in available loan alternatives for consumers to installment loans or subprime credit cards as a result of regulatory and marketplace pressures.

  • Driving For Broke: Perhaps most startling was the high cost of auto insurance for underserved consumers, a category tracked for the first time in 2015. Underserved consumers spent more on auto insurance premiums in 2015 ($36.5 billion) than they did for interest and fees on subprime auto loans ($24 billion). On average, underserved consumers paid 26.5% more in premiums than their fully served counterparts to insure vehicles of comparable value.

  • Going Long: Consumers continued to spend the largest share of interest and fees on long-term credit by a nearly 2-to-1 margin. At $55.2 billion in spending, long-term credit is the single largest percentage of fees and interest paid by consumers, with subprime auto and student loans making up the majority of these loans. Short-term credit products such as subprime credit cards and marketplace loans account for $26.2 billion in spending and continue to grow at a faster rate than single payment products like payday or overdraft.

"These numbers affirm our view that everyday Americans are struggling financially, with a majority of American adults relying on high-cost products," said Colleen Poynton, Vice President at Core. "The fact that spending on fees continues to grow at a high rate shows a clear need for tech-enabled entrants to deliver low-cost solutions at scale."

"Demand continues to increase for more innovative solutions that help low-income Americans improve their financial security," said Audrey Choi, Head of Global Sustainable Finance at Morgan Stanley. "We are committed to identifying opportunities to accelerate inclusive growth for all, and that starts by providing best-in-class support to the nation's financially underserved communities."

This annual report sizes the market opportunity to improve the financial health of underserved consumers. At a minimum, this market includes the 67 million adults that lack bank accounts or use alternative financial services, according to the FDIC. In addition, CFSI and Core measure marketplace revenue generated by consumers who are underserved due to subprime credit scores, unscorable credit information, or low-to-moderate or volatile incomes.

The report is not intended as a commentary on the appropriateness, safety, or quality of any specific product, nor should it be construed as an endorsement of, or investment advice on, any product or service included.

About CFSI
The Center for Financial Services Innovation (CFSI) is the nation's authority on consumer financial health. CFSI leads a network of financial services innovators committed to building a more robust financial services marketplace with higher quality products and services, specifically for those who are struggling. Through its Compass Principles and a lineup of proprietary research, insights and events, CFSI informs, advises, and connects members of its network to seed the innovation that will transform the financial services landscape. For more on CFSI, go to and follow on Twitter at @CFSInnovation.

About Core Innovation Capital 
Core Innovation Capital is a leading venture capital firm investing in financial services that empower everyday Americans. With offices in San Francisco and Los Angeles, Core leverages its deep financial services, technology and regulatory expertise to help entrepreneurs and other investors build disruptive, high growth businesses. Core portfolio companies save over twelve million customers more than four billion dollars every year. Investments include Oportun, Ripple Labs, CoverHound, NerdWallet, and TIO Networks. Follow Core at @CoreEMC and online at

About Morgan Stanley
Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. With offices in more than 43 countries, the Firm's employees serve clients worldwide including corporations, governments, institutions and individuals. Since 2006, Morgan Stanley has committed more than $9.6 billion to strengthen underserved communities. For further information about Morgan Stanley, please visit

Contact Information:

Press Contacts:

Shannon Austin
Center for Financial Services Innovation

Michael Azzano
Cosmo PR for CFSI

Sarah Higgins
Morgan Stanley