An alternative financial service (AFS) is a

financial service Financial services are service (economics), economic services tied to finance provided by financial institutions. Financial services encompass a broad range of tertiary sector of the economy, service sector activities, especially as concerns finan ...

provided outside traditional

banking A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...

institutions, on which many low-income individuals depend. In developing countries, these services often take the form of microfinance. In developed countries, the services may be similar to those provided by banks and include payday loans, rent-to-own agreements, pawnshops, refund anticipation loans, some subprime mortgage loans and car title loans, and non-bank check cashing,

money order A money order is a directive to pay a pre-specified amount of money from prepaid funds, making it a more trusted method of payment than a cheque. History Systems similar to modern money orders can be traced back centuries. Paper documents known ...

s, and money transfers. It also includes traditional

moneylending In finance, a loan is the tender of money by one party to another with an agreement to pay it back. The recipient, or borrower, incurs a debt and is usually required to pay interest for the use of the money. The document evidencing the debt ( ...

by door-to-door collection. In

New York City New York, often called New York City (NYC), is the most populous city in the United States, located at the southern tip of New York State on one of the world's largest natural harbors. The city comprises five boroughs, each coextensive w ...

, these are called check-cashing stores, and they are legally exempted from the 25 percent criminal

usury Usury () is the practice of making loans that are seen as unfairly enriching the lender. The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense, where an interest rate is charged in e ...

cap. Alternative financial services are typically provided by non-bank financial institutions, although person-to-person lending and

crowd funding Crowdfunding is the practice of funding a project or venture by raising money from a large number of people, typically via the internet. Crowdfunding is a form of crowdsourcing and alternative finance, to fund projects "without standard financial ...

also play a role. These alternative financial service providers are estimated to process about 280 million transactions per year, representing roughly $78 billion in revenue. Customers include the

unbanked The unbanked are adults who do not have their own bank accounts. Along with the underbanked, they may rely on alternative financial services for their financial needs, where these are available. Causes Some reasons a person might not have a ban ...

. Alternative financial services in the United States, for example via

payday loans A payday loan (also called a payday advance, salary loan, payroll loan, small dollar loan, short term, or cash advance loan) is a short-term unsecured loan, often characterized by high interest rates. These loans are typically designed to cover ...

, are more extensive than in some other countries, because the major banks in the U.S. are less willing to lend to people with marginal credit ratings than their counter parties in many other countries. In the United Kingdom, alternative financial services include

and money lending, the latter termed "home collected credit", "home credit" or "doorstep loans". Organizations such as Debt on our Doorstep campaign for improved regulation.

References

Financial services Microfinance {{finance-stub

See also

References