Many UK adults are struggling to afford everyday essentials amid a rising cost-of-living crisis and are seeking ways to get paid before payday.
In fact, data from May 2022 showed 60% of all UK adults (or 31.9 million) were finding it a heavy burden or somewhat of a burden to keep up with their bills, up from 50% (or 26.1 million) in 2020.
UK adults are resorting to short-term financial help through cheap payday loans and are seeking ways to get paid quickly, or paid before payday.
Others are buying using legal but unregulated forms of lending such as buy now, pay later (BNPL). Although interest is rarely charged on BNPL purchases, buyers put themselves at risk of overexerting their financial capabilities and face running into debt.
Buy now pay later – get paid before payday
June 2022 research by Barclays Bank and the debt charity StepChange in found that almost a third of BNPL borrowers found their loans had become unmanageable – resulting in problem debt. Shoppers who used BNPL were paying off an average of 4.8 purchases, so not just one-off essentials but habitual spending.
More data from StepChange showed 4.4 million people across the UK borrowed money just to make ends meet in 2022.
Almost three-quarters said using credit had negatively affected their health, relationships, or ability to work, while two-thirds said they were only able to keep up with payments by skipping housing or utility bills, or cutting back to the point of hardship, putting them at risk of further financial harm.
High cost borrowing
In the Financial Lives survey 2022, the FCA discovered that 1 in 10 UK adults were borrowing using high-cost credit and 8% of UK adults were constantly or usually overdrawn.
30% of UK adults have 0 – £1k available as investible assets and find keeping up with their bills a burden.
Get paid before payday with cheap payday loans
Despite their declining presence in recent years, payday lenders still managed to lend about £60.4m in the first quarter of 2022 alone, according to the FCA, while home-collected creditors lent about £95m in the final three months of 2021.
Earned Wage Access as an alternative to payday loans
Earned Wage Access gives workers the chance to withdraw a percentage of their own money they have earned before payday. Many providers charge for this service, however Income Group’s platform is free.
74% of EWA users say access to their earned wages has helped reduce their financial stress and 70% of users say access to their earned wages has helped them avoid taking out a payday loan.
2022 research from Harvard Business School showed empirical evidence that the usage of Earned Wage Access was associated with higher employee retention rates, and was suggestive of improved workplace welfare.
Learn more about EWA from Income Group in our blog.
