Last week saw another casualty from the high cost lending industry as QuickQuid went into administration, following our payday powerhouses such as Wonga and The Money Shop in the last year.
But with over 5 million people using payday loans each year according to the FCA, the disappearance of another mainstream lender will leave a huge whole of people looking for short term loans.
The danger is that this group of borrowers, often with low credit scores and considered to be vulnerable, may give rise to loan sharking and other unregulated forms of borrowing.
However, there are a number of fintech companies looking to break this mould and move customers from the reliance of high cost payday products.
WageStream recently raised £40 million in funding and their product allows staff to extract money from their wage slip based on the number of days they have earned. Where workers are used to waiting until payday for their next burst of income, this allows you to release any money earned thus far i.e if you have worked 14 days so far this month, you can take your 14 days’ worth of earnings.
This is designed to stop people waiting for their next pay cheque and help them use their own hard-earned money to pay for any immediate expenses and bills.
Neyber is another promising fintech which is tackling the payday problem by going straight through employers. Those firms that sign up with Neyber can offer small loans through the company and also provide sound advice and education on finance, budgeting and investing.
Employees earn real-life experience on how to look after their money and if they need to borrow, they can do so in an organised and manageable way.
My Financial Broker has developed a loan matching tool, helping people find short term loans based on their eligibility. Customers are presented with the best low rate and company willing to offer them a loan, defeating the need to go to multiple companies and struggling to find a potential lender.
Koyo raised over £3 million in October to help those with no credit ratings to get access to finance – when they would have typically been turned down. The product uses credit building and other forms of eligibility to help give customers the best loan – especially those that were previously left in the cold.