A UK based start-up business, Wagestream, whose aim is to put an end to payday loans, has recently received a £40m investment from a variety of different firms including one that invested in Wonga, the former payday loan giant that went into administration late last year.
Wagestream has developed new technology which, by paying a small fee, has allowed workers to access their wages at any day during the month, instead of making them wait for their full payment at the end of the month.
The Chief Executive of the company, Peter Briffett has said that the cash would allow for more companies to prevent their workers from poverty as a result of paydays, as well as the severe consequences that may arise from it.
Briffett has also has stated that the monthly pay cycle has put damage on household finances, and too many people are pushed into a corner and forced to use payday lenders and high-cost credit loans.
Although The Financial Conduct Authority has made an effort to crack down on high cost lending, in figures released earlier this month, complaints surrounding payday loans have reached their highest point in 5 years. The complaints have increased by around 130% to approximately 40,000.
The average payday loan customer borrows around £250 to help tide them over until their next payday from work, but the loans run a very high-interest rate and can often lead individuals worse off or requiring other loans to help pay them off.
The clampdown by the FCA has encouraged many borrowers to seek payouts after taking loans from claims management companies. Wonga, one of the largest UK payday lenders, collapsed last year after being flooded with complaints of compensation, costing the firm over £220m, although this is expected to by four times this amount.
Balderton, who was one of Wonga’s many shareholders, tried to save the firm from going bust with a £10m injection. However, they were unable to save Wonga from administration due to the mounting number of claims.
One of the partners at Balderton, Rob Moffat, has claimed that they had decided to back Wagestream to restore the right balance between employees and the companies which they worked for.