About this report
This market involves the provision of high-cost, short-term loans via a website. As well as 30-day loans designed to tide the borrower over until the next payday, we include other loans with interest rates of over 100% and terms of less than one year.
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.
What are the objectives of this online payday loans market report?
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.
– Lenders are often criticised for charging high rates of interest which exploit low-income consumers
– However, many lenders inspire high levels of customer loyalty and enjoy satisfaction rates that would be the envy of the mainstream banks
– Recently, regulators have taken a great interest in the industry and many lenders have pulled out of the market
This report aims to explore the industry behind these statements, probe the factors which have driven its historical growth and recent more mixed performance and provide a view on how the market is most likely to perform in the future.
Other questions the report considers include:
– Why did payday lending grow so rapidly in the UK and what factors have made it develop more rapidly here than elsewhere.
– Who takes out payday loans and why?
– Who are the main companies in the market, who owns them and how have they performed?
– What impact is the FCA’s price cap likely to have on the market in future?
– How are lenders adjusting their business models in response to it?
It is intended for:
– Operators of payday lending businesses themselves
– Investors in these businesses
– Potential new entrants to the market
– 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.
The report can assist with the exercises such as the following:
– business planning and strategy formulation
– acquisition search and screening
– due diligence
– investment decision-making
– industry regulation and policy-making
See this post for more on the internet payday lending market
Contents
Online payday lending market overview - 8
Description
Value drivers
History of payday lending
Term loans and Line-of-Credit accounts
Alternatives to online payday loans
Payday loans from high street pawnbrokers and money shops
Other high-cost credit
Conventional lending
Credit unions
Trade unions
Borrowing costs
Customers and their needs
Borrowing patterns and repeat lending
Affiliate marketing and ping trees
Market size and growth - 17
Apex Insight market estimates
Leading company revenue trends
Voluntary exit of lenders
Demand for payday loans
US market comparison
Market drivers
Macroeconomic trends
- GDP
- Unemployed and underemployed
- Wage levels and household disposable income
- Personal insolvencies
- Student debt
- Housing costs
Government fiscal tightening and benefits
Access to mainstream banks and credit sources
International comparisons
Consumer credit and credit cards
Regulation
- Current situation
- Historical demands for regulation
- Arguments against stricter regulation
- Consumer Finance Association - self-regulation
- Rollovers
- Continuous payment authority
Customers experiencing financial difficulty
Historical role of the OFT
- 2010 OFT review
- 2012-13 OFT review
Competition and Markets Authority
FCA
Regulation in other countries
- North America
- Australia
- Europe
Competitive landscape - 35
Overview of leading operators
Employees
Margins
Website popularity
Customer reviews
Profiles of leading operators
- Wonga
- Cash America
- MEM Consumer Finance (Dollar Financial Corporation)
- Express Finance (Bromley)
- Wage Day Advance / SRC Transatlantic / Speedy Cash
- Lending Stream / Zebit
- Think Finance
Forecasts - 46
Overview
Driver forecasts
- GDP
- Unemployment
- Household disposable income
Housing costs
Government fiscal tightening and benefits
Availability of other forms of credit
Impact of regulation on the forecast
Apex Insight market forecast
- Assumptions
- Market forecast
- Risks to the forecast
Appendix - 54
List of figures (UK Internet Payday Lending Market)
1 High cost credit types APR / %
2 Total amounts repaid (including principal) for £100 loan / £
3 Reasons for taking out agreement
4 Five most common reasons for choice of loan
5 % of revenue from payday loans rolled over or refinanced
6 Internet payday lending market size / £m
7 Change in total revenue of the set of leading lenders from previous year / %
8 Cash America: Interest and fees on foreign e-commerce consumer loans, 2011-13 / $m
9 UK vs. US payday loan company revenue 2012 per head /£
10 UK real GDP / % annual changes
11 Historical number of unemployed and underemployed / m
12 Number of people in employment / m
13 UK average wages and real household disposable income annual growth rates / % annual change
14 Historical number of new debt solutions per year / '000
15 UK student loan total outstanding balance /£bn
16 Historical UK number of bank branches
17 European countries' number of bank branches per million people in 2011
18 European countries' bank branches CAGR (1999-2011) / %
19 Number of adults without a bank account/cannot access credit
20 UK outstanding consumer credit / £m
21 Number of credit cards in issue / m, end of year
22 Percentage of gross lending not repaid / year average
23 Leading lender revenues by latest revenue / £m
24 Revenue per employee/ £'000
25 Pre-tax profit margins of leading payday lenders
26 Average number of website hits per month / '000s
27 TrustPilot ratings
28 Wonga Group. summary financials
29 Cash America. summary financials
30 MEM Consumer Finance: summary financials
31 DFC Global revenue segmentation, 2009-13 / %
32 Express Finance (Bromley): summary financials
33 Wage Day Advance Ltd: summary financials
34 Lending Stream Ltd: summary financials
35 Think Finance (UK) Ltd. summary financials
36 UK real GDP / annual changes
37 Unemployment and underemployment / m
38 Number of people in employment / m
39 UK real household disposable and average income / % annual change
40 Cash America: Interest and fees on foreign e-commerce consumer loans, H1 2014 vs H1 2013 / $m
41 Historical and forecast number of customers / millions
42 Market forecast / £m
