Ways that Fintech is disrupting the lending marketing

by Startacus Admin

Whilst mainstream lenders are trying to lose the connotation of payday loans, a wave of fintech are looking to offer complete alternatives.

The high lending and ‘payday’ industry continues to attract criticism from politicians, religious figures and the press. In 2014, the industry was worth over £2 billion and had over 50 lenders – but this number is dwindling following the surprise exit of payday powerhouses Wonga, The Money Shop and recently QuickQuid following a surge of compensation claims.

However, with over 5.4 million people using payday loans in the last year, there is now a huge gap to fill and with less lenders available, there are a number of fintech companies looking to fill this space.

London-based Neyber, offers a product for employers and this can facilitate small loans to their employees and given them financial advice on daily spending, budgeting and investments. This should reduce the need for high cost lending, repeat borrowing and debt spiralling.

Earlier this week, Koyo raised £3.8 million to offer loans to people with no credit ratings, who previously would have been denied loans, but simply need an opportunity to build up their credit score. The company is set to go live and start operating in Q1 next year.

There is also WageStream, an exciting fintech that has raised £15 million through VC, which allows staff members to tap into income that they have already earned that month, rather than waiting for their next payday. So if they have worked 14 days already, they can release this money to pay for any bills or expenses. 

A spokesperson from online broker My Financial Broker said “More and more start-ups are looking to address the problem with high cost lending which is causing damage and financial difficulty to millions of people in the UK.”

“Consumers should seek alternatives and realise that there are much more affordable and flexible products out there, rather than resorting to high cost loans.” 

The role of brokers and comparison sites will also play a role in helping move people towards alternatives. Price comparisons and their tables are currently commercially driven, but there has always been a conversation amongst regulators to promote the cheapest rates possible.

Equally, customers should try using soft search checks and eligibility checkers from comparison sites to help find the lowest rates possible, instead of using something that is quick, but also very expensive.

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Published on: 1st November 2019