PawnTech Trend Report 2021

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PawnTechTrend Report2021How to keep the lights on and knowingthe trends of the Pawn Industry

Trend Report 2021 JuneInside the ReportT R E N D S2021JUNE040608091012131416Hello from Tally Mack, CEOThe Impact of the Pawn IndustryHow Pawn Differs from Other Financial InstitutionsThe Pawn CommunityPawn Industry & DemographyConfiscation & Redemption PercentagesImpact of COVID-19Mobile TrendsTop 6 Industry TrendsMethodology & SourcesInformation and analysis presented in this report is produced using proprietary data from Bravo Store Systems,unless otherwise cited. To protect the anonymity of Bravo customers, data is presented in the form of averagesacross all Bravo customer locations.Information presented represents data from January 1, 2020 to June 1, 2021, unless otherwise 87bravostoresystems.com3

Trend Report 2021 JuneHello"from Tally MackLike most businesses, Bravo weathered the pandemic byleaning into our core purpose and focusing on serving our customers.As we navigated through unprecedented business conditions togetherwith the roughly 1,300 pawnshops that are supported through ourplatform, it reminded us of something that we've always known:Pawn doesn't quit.There were challengingmoments during theCovid-19 pandemic whenit seemed that everythinghad been turned upsidedown, leaving everyonewith questions about when,if ever, the pawnbrokingworld would return toprevious conditions.We know that in order torecover, it is necessary totake a deep dive into whatthe latest industry data istelling us.4888.407.6287bravostoresystems.comThe purpose of this report is to share keyindustry data with the people who helpshape our landscape (such as stakeholders,media and lawmakers) and to providebusiness operators with PawnTech trendsthat can help inform decisions abouttechnology investments.Message from the CEO"Tally Mack, Chief ExecutiveAs the industry leader in developing first-to-market softwaresolutions and services to niche industries, we believe weare in a unique position to advocate for underserved andunderrepresented markets through providing this criticalinsight. Some of the findings are unsurprising. For example,changes that were already afoot—like the shift towardsmobile—were accelerated over the past year.In our first PawnTech Report, we hope to spark an insightfuldialogue about the critical nature of the non-recourse, secured,safety-net credit supplied by pawnshops millions of timeseach year. This data may also help clear up confusion aboutpawnshops as compared with other alternative lendersand help the public understand that no other creditor offersthe same type of transaction provided by pawnbrokers."888.407.6287bravostoresystems.com5

Trend Report 2021 JuneNo other creditor offers the same typeof transaction as do pawnbrokers.A study by Vanderbilt University noted thatThe Impact of the Pawn Industry"Pawnbroking is the oldest source of credit. A pawn is a collateral loan.Pawnbrokers lend money on items of value ranging from gold anddiamond jewelry to musical instruments, televisions, electronics, toolsand equipment, firearms and more.The amount of the loan is based on the value of the collateral.Pawn loans are typically small-dollar safety net loans.The interest charged, as well as the term, can vary from onestate to the next. During the pawn transaction, customersreceive a written explanation, called a pawn ticket, thatexplains the details, including the interest amount, how longthe customer has to pay back the loan and more.Consumers seem to avoid makingbig financial mistakes when usingpawnshops. Something about theuse of personal items (and particularlysentimental personal items) as collateralmay distinguish these loans fromcredit cards, payday loans, and the like interms of borrowers’ repayment anddefault behavior.16%U.S. adultsunderbankedAccording to the latest findings of the FDIC,22% of American adults (63 million) are eitherunbanked or .S. adultsunbankedunderbankedThe 16% of Americans who are underbankedhave some sort of bank account, but they alsorely on alternative financial services.The almost 6% of Americans who are unbankedhave no bank account whatsoever and must relyon alternative financial products and services—suchas payday loans, check cashing services, moneyorders and pawn shop loans—to take care oftheir finances.888.407.6287"5.4%U.S. adultsunbanked withno bankwhatsoeverbravostoresystems.com7

Trend Report 2021 JuneHow Pawn Differs from Other Financial InstitutionsPawnbrokers serve customers at every income level, but somerely on pawn loans because they do not have access to traditionalbanking products.Most customers, as reflected on page 12, redeemtheir loans and simply pick up the item from thepawnshop once they've repaid what they owe. Pawnloans are non-recourse, meaning if the customer does notredeem their loan, it has no impact on their credit score.Rather, the item is forfeited to the pawnbroker, who thensells it in their shop— usually at a deeply discounted pricewhen compared to retail value.What are Non-Recourse LoansThe distinction between recourse loansand non-recourse loans comes into playif you cannot repay the money you’veborrowed. According to the IRS,“recourse debt holds the borrowerpersonally liable and allows lenders tocollect what is owed for the debt evenafter they’ve taken collateral (home, creditcards). Recourse lenders have the right togarnish your wages, levy your accountsand impact your credit score. By contrast,a non-recourse debt (loan) does not allowthe lender to pursue anything other thanthe collateral.”That means that if a borrower can’t repaya payday loan, it can hurt their credit,overdraw their bank account, incite callsfrom debt collectors and even causewages to be garnished.Additionally, payday lenders frequentlyallow borrowers to roll over their debt.This gives the customer more time to payback the loan, but it also adds interestand fees, which increases their debt. Thiscan happen over and over again, creatinga cycle of debt that is difficult to break.Therefore, the primary differenceoan favors the lender, while anon-recourse loan benefits the borrower.Payday loans are recourse loans, just liketitle loans and paycheck advances.The Pawn CommunitySize of the Pawn Industry73k10kestimated numberof employees in thepawn industry*approximate numberof pawnshops in the U.S.*Multiplied approximate number of pawnshops in the U.S. and average number of employees across all Bravo customer 7.6287bravostoresystems.com9

Trend Report 2021 JunePawn Industry & DemographyLoans by Loan TypeLoans by Gender Average loan amountAverage loan amountNew Loan 187.01FEMALEMALE 288.20 253.02RingsChainsLoans by Age GroupAverage loan amountWatchesBraceletsMiscellaneous Jewelry35-44 227.6018-24 155.61Electronics55-64 283.72Firearms & KnivesToolsMusical Instruments25-34 196.6410888.407.6287bravostoresystems.com45-54 283.9865 244.46NecklacesTop 10 Loan Categories888.407.6287bravostoresystems.com11

Trend Report 2021 JuneThe Impact of COVIDAverage Confiscation PercentageIt's a common misconceptionthat pawn shops acquire ahigh volume ofstolen items or itemsused in crimes.In fact, the numberof items confiscatedfrom pawnshops isincredibly low, onlysix items out of every10,000! Pawn is aheavily regulatedindustry, at both stateand federal levels,and pawnshops are requiredto comply with alllocal and federal law enforcementregulations and laws. Pawnshopsreport transactions oftento their local lawenforcement agenciesand are highlycollaborative when localauthorities requireassistance tracing asuspicious item or pieceof evidence.Confiscation percentagewas calculated usingtransaction and confiscation numbersfrom January 1, 2018 to June 1, 2021,across all Bravo customer locations.Average Redemption PercentageAnother common misconception isthat pawnshop users bring their itemsto the store to dispose of the itemand have no intention of paying offtheir loan or retrieving the item.In actuality, individuals rely onpawnshops as a trusted financialinstitution that can meet animmediate financial need by issuingshort-term, non-recourse loans.As the chart here shows, individualsredeem their loaned items at a veryhigh rate, dispelling myths about thebehavior of pawnshop ption percentagewas calculated using transactionand redemption numbers fromJanuary 1, 2018 to June 1, 2021,across all Bravo customer locations.Pawnshop LoanBalances DecreasedMobile UsageIncreasedStore LocationsIncreasedThe greatestcontributing factorto the overall decreasein loan balances atpawnshops nationallywas the increase incustomer redemptionsduring this time.State and municipallockdowns duringCovid-19 were theprimary drivingfactor behind thespike in Bravocustomers adoptingmobile app use andthe increase inmobile loan andlayaway payments.In contrast to thecross-industry trendof permanentbrick-and-mortarclosures duringCovid-19, Bravocustomers wereopening new storelocations atrecord pace.Bravo observed thatredemption ratesincreased andpawnshop loanbalances decreasedmost during the timeperiods wheregovernment stimuluspayments weredisbursed. The increasein redemption ratessuggests strongly thatpawnshop customersare mindful of theirfinancial health as itrelates to outstandingloans, and used thestimulus money to payoff outstanding debtsand redeem items.Consumers neededa way to make loan/layaway paymentsremotely andpawnshop operatorsneeded a way tocommunicate withcustomers, acceptpayments and managetheir business remotelywhile brick-and-mortarstores were closed.Bravo customersopened nearly 300%more store locationsin 2020 than theprevious year, despitethe pandemic.Growth among Bravocustomers is largelyattributed to agilityand quick adaptationof new technology,enabled throughthe Bravo Platform.Customers wereable to implementeCommerce andmobile communicationand selling channelsovernight, helpingto overcome stagnationand decliningrevenue growth.888.407.6287bravostoresystems.com13

Trend Report 2021 JuneBravo Customer Adoption & Usageof MobilePawn AppConsumer Adoption and Usage of MobilePawn App# of Bravo Customers Using Mobile PawnPercentage of Layaway Payments Made Through MobilePawn uary 2018January 2019January 2020January 2018January 2019January 2020January 2021January 2021Percentage of Loan Payments Made Through MobilePawn App110kconsumerdownloadsof mers withMobilePawn are14%12%200x more 16-20klikely to redeemthan forfeitpaymentsmade throughMobilePawneach month10%8%6%4%2%0%January 2018January 2019January 2020888.407.6287January 2021bravostoresystems.com15

Trend Report 2021 JuneTop 6 Industry TrendsWhile some pawn industry trends are in line with customer preferences nationally, others defyexpectations. The pawn industry has proven itself to be exceptionally resilient throughout theCovid-19 pandemic, thanks to quick adoption of new technology and an understanding of itscritical role in providing financial options to underserved and underrepresented communities.Rising redemptionrates reflect increasedconsumer reliance onpawnshops forshort-term loans andincreased intent to pay offloans and retrieve items.KEYTA K E A W AY S2021JUNE%Confiscation rates areincredibly low,dispelling the myth thatpawnshops acquire andtransact high volumes ofitems tied to crimes.Average loan amountsremain low (under 200),confirming that consumersrely on pawnshops asa financial institutionfor short-term,non-recourse loans.16888.407.6287bravostoresystems.comThe reliance on pawnshopsfor short-term, non-recourseloans is age agnostic.Pawnshop customerdemographics span allage groups, and customerage has a direct relationshipto average loan amount.Percentage of unbankedpeople in the U.S. remainssteady, a strong indicator thatlarge segments of the populationare in need of the non-recoursefinancial assistance offeredby pawnshops.Adoption of mobileapplications by pawnshopoperators and pawnshopcustomers continues togrow steadily, as does thevolume of payments madethrough MobilePawn.

rely on pawn loans because they do not have access to traditional banking products. Most customers, as reflected on page 12, redeem their loans and simply pick up the item from the pawnshop once they've repaid what they owe. Pawn loans are non-recourse, meaning if the customer does not r

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time series are related in simple ways to series which are stationary. Two im-portant examples of this are: Trend models : The series we observe is the sum of a determinstic trend series and a stationary noise series. A simple example is the linear trend model: Y t β 0 β 1t ε t. Another common trend model assumes that the series is the .

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between equities, bonds, commodities and real estate. The application of trend following offers a . Faber (2010) uses momentum and trend following in equity sector investing in the United States, while Antonacci . United States, Australia, Hong Kong, Japan, New Zealand and Singapore. We collected equivalent

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