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Payday Startups – expert report for companies from the payday loan industry.

Get an overview of an emerging niche in fintech: stats, insights, takeaways.

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Why payday startups?

The effects of Brexit and the COVID lockdown on the UK's economy resulted in a growing lack of financial stability - as many as 74% of people in the country are worried about keeping their budget in check. In these circumstances, payday loans have become a troublesome element of the economic landscape.

However, the market is in the midst of a progressive change, and this is thanks to digital alternatives: peer to peer loans, guarantor loans, and other fintech products. The goal of this report is to inspire the industry to look deeper into the payday loan sector and contribute to a more efficient and customer-focused digital lending market.

Payday loans

The bustling payday lending market uncovers the poor financial stability of many UK households.
  • Personal loans

    In the UK, unsecured debt comes mostly from personal loans. In 2012, as much as 46% of issued payday loans were not repaid in full and on time.

  • Staying out of the red

    Customers are most likely to take a payday loan in a time of financial instability - either when they experience an increase in spending or a decrease in income.

  • Opaque terms and conditions

    Too many payday loan providers prey on their customers’ lack of basic knowledge and poor understanding of the actual loan cost. Only 53% of UK customers are fully aware of all the extra charges.

  • Credit rating

    The payday lending market relies on customers who have poor credit ratings and experience problems when applying for regular loans or had difficulty repaying one in the past.

Let’s work together
Payday advance apps have become an increasingly popular alternative to payday loans and we anticipate that they’ll become more popular. [...]

You’ll likely see the expansion of product offerings to include those that help their customers save more, ranging from budgeting tools to discounts.
Afit Siddiqi picture

Atif Siddiqi

Founder and CEO of Branch

Payday loans: key takeaways

  • Customers would rather borrow large sums online (an average of £290) than on the High Street (£180).
  • Digital lending is a thriving market on its own: 83% of payday loan customers have taken out a loan online.
  • Compared to high street borrowers, online customers are more likely to repay loans in full on time and are more confident about their ability to repay the whole sum within the deadline.
  • Payday loans are spent on essentials: 53% of UK customers spent their loan money on living expenses, e.g. groceries or bills.
  • The payday startups market is currently thriving in the US, but the UK presents a high potential for this sector.
  • Cap regulations introduced by the FCA resulted in a reduced number of payday loan customers.

Netguru in numbers

  • 83%

    Loans taken online

  • £260

    Average loan size

  • 64%

    Loans repaid in full and on time

  • 8.5M

    Part-time workers in the UK

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