Online Payday Lending: UK Market Profile and Forecasts

Payday lending has emerged and grown into a major industry with customers measured in millions in just a few years.

The industry is frequently in the news but is not well understood. Lenders are often criticised for charging high rates of interest which exploit low-income consumers. They are also frequently praised for offering credit to those who cannot obtain it from mainstream sources and giving them an alternative to illegal loan sharks. This report aims to probe beneath these two statements, explore the factors which have driven the high rates of growth and provide a view on how likely it is to continue in the future.

In this market report we review the UK online payday lending industry. We quantify the market size, historical growth rates, segmentation patterns and levels of industry profitability while reviewing key factors behind these figures.

We also carry out an in-depth analysis of the relevant drivers of industry growth – in particular the macroeconomic environment and regulatory framework – setting out historical trends and available forecasts. Our forecast for industry growth is based on this analysis of historical trends and growth drivers.

We believe that, in order for those involved in the market to make the best decisions in this complex and changing environment, they need to have access to the best information. The aim of this report is to provide this.

It is intended for:

• Operators of payday lending businesses themselves
• Investors in these businesses
• Market regulators and policymakers
• Banks, analysts, consultants and other parties with interests in the sector

This report is based on:

• Interviews with senior-level contacts across the high-cost credit market
• Extensive research into published industry sources
• In-depth analysis of the macroeconomic environment and relevant market drivers
• Financial analysis of the accounts of companies in the industry.

Information from these sources has been synthesised and presented clearly and concisely with extensive use of charts and tables to illuminate points and support conclusions.

Market forecasts have been constructed using simple assumptions which are clearly stated. Supporting evidence is provided for our assumptions but readers can easily flex them to model alternative scenarios.