Within three to five years, a third of the portfolio in the pawnshop market could be taken over by non-traditional collateral

Over the next three to five years, a third of the portfolio in the pawnshop market may be taken not by traditional collateral in the form of gold and jewelry, but by equipment, cars, wardrobe items and even intangible assets. This is due to tightening regulation of the industry and a decrease in its profitability. At the same time, players in the pawnshop market will strive to move into gray and related segments where there is no regulation, which is fraught with danger for their clients.

At the end of 2023, the portfolio of the pawnshop market amounted to 65–70 billion rubles, according to Alexey Lazutin, chairman of the board of the National Association of Pawnshops (NOL). At the end of the third quarter (the latest published official data from the Central Bank), the figure was at the level of 52.5 billion rubles, at the end of 2022 it was 43.1 billion rubles. By the end of 2024, NOL believes, “taking into account all participants,” the portfolio of the pawnshop market could grow to another 75–80 billion rubles.

But there are also more modest market estimates. Thus, according to Stanislav Boronin, general director of the Fianit pawnshop chain, at the end of 2023 the market portfolio hardly exceeded 55 billion rubles.

The difference in estimates is due to the fact that NOL data also take into account the indicators of “quasi-pawnshops,” which “essentially provide the same services, without any restrictions from the regulator and special regulations.” “Due to the fact that the Bank of Russia, starting in August 2023, introduced a moratorium on limiting the FSC (the full cost of the loan.— “Kommersant”) for all segments of the financial market, except for pawnshops, the trend of small participants moving into related segments continues to gain momentum,” explains Mr. Lazutin (see “Kommersant” dated August 23, 2023).

Not only is the composition of market participants transforming, but the collateral against which pawnshops issue funds to citizens is changing. Currently, 85% of the market portfolio is in gold, traditional for the industry, mainly in the form of jewelry. However, in the next three to five years, their share may decrease to 65–70%, losing up to a third of the market to other types of collateral – equipment, fur coats, cars, says Alexey Lazutin. About 27% of pawnshop market participants intend to expand the types of collateral, according to the latest Central Bank market study. This is five times more than a year earlier, the regulator indicates.

Market participants confirm the expansion of the range of product categories accepted as collateral – it now includes liquid gadgets, equipment and electronics.

The automotive segment remained a small niche, but only because the bulk of it was taken over by microfinance organizations that issue loans secured by vehicle ownership. “Against this background, pawnshops have begun the procedure of integration with large platforms and are indispensable verifiers who, on the one hand, can quickly buy, and on the other hand, profitably sell exactly the item with the characteristics indicated in the description,” notes Alexey Lazutin .—And if regulatory pressure on the industry remains at the current level, then in the next five to ten years the pawnshop component may give way to resale leadership” (see also “Kommersant” dated November 13, 2023).

Pawnshops are ready to consider completely innovative pledges. Thus, the Regional Association of Pawnshops sent proposals to the Bank of Russia to amend the law on pawnshops, where they proposed to allow them to accept intangible assets as collateral, emphasizes the chairman of the board of the association, Lyudmila Gribok.

“Transferring crypto to a pawnshop as collateral without the purpose of its further redemption may well in the future turn pawnshops into crypto exchangers and even crypto exchanges,” says Ilya Zharsky, managing partner of the Veta Expert Group.

At the same time, “the industry is too conservative to wait for transformation in terms of collateral this year,” clarifies Artem Evstratov, co-owner of the First Jewelry Pawnshop chain. “Non-jewelry pledges require the pawnshop to restructure its model, require greater competencies from appraisers, and essentially put the industry in the face of competition with the gray market, consignment shops and buying points,” warns Stanislav Boronin. Against this background, he adds, the trend towards consolidation and reduction in the number of market participants will continue.

Polina Trifonova