Payday loans "will be extinct by 2023"
Financial wellness app Wagestream has predicted that the payday loan industry will die out by the end of 2022 after a Freedom of Information response from the FCA revealed the number of payday loans has fallen 37 per cent year on year.
The response also revealed that the number of payday lenders has fallen by almost a third (31 per cent) year on year.
Wagestream predicts that the payday loan industry will be "laid to rest" by the end of 2022 if this trend continues.
The firm said 807,723 payday loans were taken out in the third quarter of 2019, down 37 per cent on the 1,277,938 recorded by the Financial Conduct Authority (FCA) in the third quarter of 2018.
Wagestream campaigns against payday poverty and blames the payday loan industry for trapping low-income workers in a "damaging cycle of credit dependency".
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The firm said the rate of decline in the volume of loans is becoming more extreme, according to the data released by the FCA following the FOI request.
The number of payday loans shrank annually by 34 per cent in the second quarter of this year, by 32 per cent in the first quarter and by 23 per cent in the final quarter of last year. Prior to that, the volume of loans had been climbing.
The number of lenders offering payday loans has also fallen dramatically. There were 61 firms offering payday loans in the third quarter of 2019, down from the 88 companies in the third quarter of 2018.
If lenders continue to leave the market at the same rate, Wagestream said there will no longer be any firms offering payday loans by the end of 2022.
Peter Briffett, CEO and co-founder of Wagestream, said: “Our campaign to kill off payday loans has buried Piggybank, Wonga and QuickQuid, and now we’re getting ready to dance on the grave of the entire industry.
“Consumers are getting wiser to how much misery these loans cause, and more and more lenders are fleeing the market every month as they realise how toxic the industry is."
He said that new technologies such as income streaming, which gives workers access to their earned income between pay cycles, is now moving to mass-market adoption, with leading brands such as Bupa, Rentokil and the NHS leading the charge.
“Wagestream is winning its battle to destroy the payday loan industry," said Mr Briffett.
"We are also campaigning to end overdraft fees forever and to get all UK workers £250 in savings.
“We won’t rest until our missions are complete, and judging by these figures, we shouldn’t have to wait long.”
The loans registered for the third quarter of this year represent £231m of credit. Current interest rates mean borrowers will have to pay back £398m, according to the regulator.
Wagestream said the research paints a "torrid picture for the predatory payday loans industry, which has come under huge scrutiny in recent years for ripping off customers with high charges and interest".
The sector fell foul of a cap on interest rates in 2015 that stipulated providers could no longer exceed 1,500 per cent APR.
Payday lender Piggybank quit the market last week, soon after QuickQuid stopped trading.
After the demise of payday loan firm QuickQuid, Mr Briffett vowed "not to rest until every last part of the payday loan industry is six feet under".
Wagestream said its income streaming solution tackles payday poverty by giving workers access to a percentage of their accrued salary when they need it. It said this solves a major cash flow issue for UK workers created by monthly wage payments, forcing many to take short term high interest credit options.
The average advance is £84 and the average employee uses Wagestream 2.2 times per month, paying a flat fee of £1.75 each time they use it.