The History Of Payday Loans
Posted on by LauraThe exact origin of payday loans is a little sketchy. Resources indicate that the concept of ‘loans’ started as far back as thousands of years ago when Rome was in power. The only thing for certain is that payday lending stores began to appear on the US and UK high street in the early 1990’s and they quickly grew in popularity thanks to economic conditions which lent themselves to breeding the demand for payday loans, and also the convenience of obtaining these loans further fuelled their demand. Then, as technology evolved, new digital platforms emerged for payday lenders to reach their customer base and the level of demand increased phenomenally.
The evolution of loans really began in the 1930s where many companies offered outlets where their employees could purchase clothes, food and other necessities on credit. The cost of these items would then be deducted from them in their next pay cheque. This concept developed and companies began to introduce ‘cheque cashing’ loans which were based on wage slips and not credit checks. Stores called ‘Mom and Pop’ stores opened especially to cater for these types of loans where customers would write post-dated cheques for the agreed amount plus a small fee.
In the 1990’s payday loans really took off as Mom and Pop stores merged and became household names payday lenders. The number of retail outlets grew from none at the beginning of the 1990’s in the US to 22,000 in the US today, where there are two payday lenders for every Starbucks found on the high streets. This trend was also replicated in the UK and across the UK high streets.
When the internet was introduced in the late 90’s, payday lenders identified a huge opportunity to reach out to their customer base via a different medium. Setting up websites meant that customers no longer had to go into town to apply for their payday loan, they could do this from the comfort of their own home. Consequently demand for payday loans increased tenfold and reached an all-time high. This trend has continued to increase every year and the industry is now worth £32billion in the US and £1.9 billion in the UK.
The history of payday loans really stems from the concept of corporate loans for their staff and gradually the concept of loans evolved. There is no doubt that the introduction of technology, in particular the internet, increased the popularity of payday loans phenomenally.