What is the Payday Loans Industry Worth in the UK 2024?

The most recent statistic for the UK payday loans market is that in 2020, the total value of payday loans in the UK was £2.7 billion, according to the FCA, and the general personal loans market was valued at £37.7 billion in 2022. In the aftermath of COVID-19, the personal loans market is on the path to recovery. However, rising interest rates, driven by inflation, are making consumers feel cautious.

47% of UK adults express discomfort in using credit products to borrow money, echoing widespread concerns about the increasing cost of borrowing. This defensive state might suggest a general wariness towards personal loans and borrowing in general. Despite this, as consumers anticipate a continued rise in interest rates, some may be taking advantage of these current low rates.

Key Personal Loan Market Statistics

• Personal Loan Market Size: Estimated 8% growth, reaching a value of £37.7 billion in 2022, yet remaining below pre-pandemic levels.
• Personal Loan Market Trends: 82% of consumers expect interest rates to rise over the next couple of years.
• Personal Loan Consumer Behaviours: 17% of borrowers consider a loan for a new car/vehicle, higher than for other reasons.
• Personal Loan Market Innovation: Open Banking technology could enhance affordability and credit checks, simplifying the borrowing process.

Market Size of UK Payday Loan Market

Retail banks continue to dominate the unsecured loans market, with half of UK adults having structured personal loans from banks, building societies, or major retailers. This trust in larger lenders might stem from consumers’ existing relationships with these entities, such as through current accounts. However, there is potential for specialist lenders to gain traction, especially if they can compete on interest rates, leveraging the popularity of price comparison websites.

Lenders, regardless of their size, have an opportunity to position themselves as viable options for financially vulnerable customers amid the ongoing cost of living crisis. Tailored support and sustainable repayment plans are crucial for attracting and retaining customers. Marketing loans as a cost-effective borrowing solution can highlight their value, particularly for consumers managing multiple credit products.

UK Borrowing Trends 2024

According to the Financial Conduct Authority (FCA), a staggering 5.4 million payday loans were borrowed over a year-long period in the UK. This figure serves as a barometer of the nation’s financial behaviour, highlighting both reliance on short-term lending and providing insights into monetary pressures faced by the populace.

The Consumer Financial Protection Bureau (CFPB) reports that over 80% of payday loans are rolled over or followed by another loan within two weeks. This statistic underscores the dependency on these loans and the potential pitfalls of a recurring cycle of debt.

The Center for Responsible Lending reveals that the average payday loan customer takes out 10 loans per year, spending about 200 days in debt. This sheds light on the recurring nature and extended duration of debt cycles within the payday loan industry. 

UK Google search volume for the words “Quick Loans”was 14,000 searches per month in 2022, up from around 8000 per month the previous year, presumably due to the cost of living that more people were in demand for quick loans.

Global Payday Loan Market

The global Online Payday Loans market is anticipated to experience significant growth between 2023 and 2030, with a steady rise in 2022. Key players in this industry include Bugis Credit, Raffles Credit, A1 Credit, EasyCash, 365 Credit Solutions, PT InFin Tech Indonesia, Tala, UangTeman, Fortune Credit, Robocash, Amaze Credit, Cashwagon, TunaiKita, GM Creditz, Tangbull. This market is segmented into North America, Europe, Asia-Pacific, South America, and the Middle East and Africa.

Pew Trusts discovered that 12 million Americans take out a payday loan each year, with an average loan amount of $375. This data shows the substantial scale and impact of payday loans in the United States, acting as a benchmark for understanding the industry’s reach.

According to the Consumer Financial Protection Bureau, a typical payday loan borrower spends $520 in fees to borrow $375. This statistic reveals the significant cost inefficiency for borrowers, emphasising the need for transparency and equitable lending practices. The CFPB notes that nearly half of all payday loan customers defaulted within two years, highlighting the high risk associated with this form of lending.

In 2020, an estimated 37% of payday loan borrowers in the U.S. resorted to payday loans due to a lack of alternatives, as reported by Statista. This statistic underscores the industry’s role as a last resort for a significant portion of borrowers.

The payday lending industry generated over $6.1 billion in 2020, according to IBISWorld. This figure shows the financial scale of operations and the industry’s impact on the broader economy.

Approximately 15,600 payday loan establishments exist in the United States, as per IBISWorld. This data showcases the extensive reach of the payday loan industry, influencing the financial habits of countless individuals.

Concluding Thoughts

In conclusion, the payday loans industry, both globally and in the UK, is marked by significant figures and statistics. While payday loans offer quick financial solutions, the associated risks and costs cannot be ignored. Understanding these statistics is crucial for policymakers, industry players, and consumers alike, as it lays the foundation for informed decision-making, regulatory measures, and the pursuit of viable alternatives in the financial landscape.