Skip to main content
SpringerLink
Log in

Fintech to the Rescue or Predators in Disguise?

  • Chapter
  • First Online:
Taming the Fringe

Part of the book series: Palgrave Studies in the History of Finance ((PSHF))

  • 150 Accesses

Abstract

It is not clear whether those locked out of the small-loan market are better off without a loan. Affordable credit remains out of reach for many low-income households. Lending small sums is expensive, risky and the product invites negative publicity and criticism. Technology might offer new opportunities to disrupt the high-cost credit sector. Whether fintech offers a long-term and financially viable alternative to fringe providers is unknown. Some consumer advocates think these companies are yet another form of predatory lending profiting off of poor and vulnerable households. Two questions remain unanswered: What does financial inclusion actually mean for the poor and is there a way to responsibly overcome the inherent tension in pricing risk for a market segment that has experienced financial difficulties before seeking credit.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 99.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 129.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 129.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Bibliography

  • 2018 Statistical Report World Council of Credit Unions. Association of British Credit Unions.

    Google Scholar 

  • “A Modern Credit Revolution: An Analysis of the Short-term Credit Market.” 2016. Social Market Foundation on Behalf of the Consumer Finance Association.

    Google Scholar 

  • “Access to Financial Services.” 1999. Report of the Policy Action Team 14 Social Exclusion Unit. HM Treasury, November.

    Google Scholar 

  • “Access to Financial Services in the UK.” 2016. Financial Conduct Authority, May.

    Google Scholar 

  • “Annual Report.” 2016. CURO Group.

    Google Scholar 

  • “Annual Report.” 2018. CURO Group.

    Google Scholar 

  • “Annual Report.” 2015. Enova International.

    Google Scholar 

  • “Annual Report.” 2019. H&T Group.

    Google Scholar 

  • “Annual Report.” 2018. Responsible Finance.

    Google Scholar 

  • Berthoud, Richard, and Teresa Hinton. 1989. Credit Unions in the United Kingdom. London: Policy Studies Institute.

    Google Scholar 

  • Bow, Michael. 2017. “The FCA Killed Payday Loans But What Followed Could Be Just as Bad for Borrowers.” Evening Standard, March 14.

    Google Scholar 

  • Burgess, Kate. 2014. “New Albemarle & Bond Owners Bank on Tradition.” Financial Times, April 20.

    Google Scholar 

  • Butler, Sarah. 2019. “Albemarle & Bond Pledge Book Bought by Rival Pawnbroker.” Guardian, September 30.

    Google Scholar 

  • Chambers, David, Rasheed Saleuddin, and Craig McMahon. 2020. “Innovations in Alternative Finance in Historical Perspective.” In Palgrave Handbook of Technology Finance, edited by Raghavendra Rau and Robert Wardrop. London: Palgrave Macmillan.

    Google Scholar 

  • “Citizens Advice Impact Report 2015/16.” 2016. Citizens Advice.

    Google Scholar 

  • “Consumer Credit – High-cost Short-term Credit Lending Data.” 2019. Financial Conduct Authority, January 24.

    Google Scholar 

  • “Consumer Lending in the UK.” 2020. Statistica.

    Google Scholar 

  • Davies, Sara, Andrea Finney, Sharon Collard, and Lorna Trend. 2019. “Borrowing Behaviour.” Personal Finance Research Centre, the University of Bristol on behalf of the Standard Life Foundation, August.

    Google Scholar 

  • Dobridge, Christine. 2018. “High-Cost Credit and Consumption Smoothing.” Journal of Money, Credit and Banking 50 (2–3): 407–33.

    Google Scholar 

  • Drakeford, Mark. 2002. “Co‐ordinating Policies and Powers to Reduce Social Exclusion: The Welsh Approach to Credit Union Development.” The Wales Law Journal 1 (3): 246–55.

    Google Scholar 

  • Edmonds, Tim. 2018. “High-cost Consumer Credit: The New Regulatory Regime.” House of Commons Library CBP–07978, May 31.

    Google Scholar 

  • “FCA Confirms Biggest Shake-up to the Overdraft Market for a Generation.” 2019. Financial Conduct Authority, June 7.

    Google Scholar 

  • Flinders, Karl. 2019. “Wagestream Gives Staff Alternative to Payday Lenders: Fintech 30.” ComputerWeekly, November 13.

    Google Scholar 

  • Fussell, Sidney. 2019. “The New Payday Lender Looks a Lot Like the Old Payday Lender.” Atlantic, December 18.

    Google Scholar 

  • Gregory, Dan, and Ben Hughes. 2014. “Just Finance.” cdfa.

    Google Scholar 

  • Gregory, Ian, Humphrey Southall, and Daniel Dorling. 2000. “A Century of Poverty in England and Wales, 1898–1998: A Geographical Analysis.” In Researching Poverty, edited by Jonathan Bradshaw and Roy Sainsbury, Chapter 7. London: Routledge.

    Google Scholar 

  • Gregory, Lee, and Mark Drakeford. 2011. “Just Another Financial Institution? Tensions in the Future of Credit Unions in the United Kingdom.” Journal of Poverty and Social Justice 19 (2): 117–29.

    Google Scholar 

  • Goth, Peter, Donal McKillop, and Charles Ferguson. 2006. Building Better Credit Unions. Bristol: The Policy Press.

    Google Scholar 

  • Hall, Archie. 2019. “Albemarle & Bond Pawnbrokers Cease Trading.” Financial Times, September 13.

    Google Scholar 

  • Hadfield, Charlotte. 2019. “Families Sick to Their Stomachs by ‘Sudden Closure’ of 100 Pawnbroker Shops.” Liverpool Echo, September 14.

    Google Scholar 

  • “High-cost Credit: Including Review of the High-cost Short-term Credit Price Cap.” Financial Conduct Authority, FS 17/2, July 2017.

    Google Scholar 

  • “High Cost Credit Review Technical Annex 1,” Financial Conduct Authority, July 2017.

    Google Scholar 

  • “Impact of Regulation on High Cost Short Term Credit: How the Functioning of the HCSTC Market has Evolved.” 2017. Consumer Finance Association, March.

    Google Scholar 

  • “Joint Administrators.” 2014. In Administration High Court of Justice, Chancery Division, Companies Court Case No. 2321. Albemarle & Bond Holdings.

    Google Scholar 

  • Jones, Paul. 1999. Towards Sustainable Credit Union Development: A Research Project. Manchester: Association of British Credit Unions.

    Google Scholar 

  • ———. 2006. “Giving Credit Where It’s Due: Promoting Financial Inclusion Through Quality Credit Unions.” Local Economy 21 (1): 36–48.

    Google Scholar 

  • ———. 2008. “From Tackling Poverty to Achieving Financial Inclusion – The Changing Role of British Credit Unions in Low Income Communities.” The Journal of Socio-Economics 37: 2141–54.

    Google Scholar 

  • Kauflin, Jeff. 2020. “The Future of Payments: Fintech 50 2020.” Forbes, February 12.

    Google Scholar 

  • Lane, Pippa, and Laura Rodrigues. 2016. “Filling the Gap: Can Banks Step into the Gap Left by Payday Loans – and if so, How?” Citizens Advice, 2016.

    Google Scholar 

  • “Making the Poverty Premium History.” 2017. Personal Finance Research Centre, the University of Bristol, November.

    Google Scholar 

  • Makortoff, Kalyeena. 2020. “Wonga Claimants to Get Just 4.3% Payout for Mis-sold Loans.” Guardian, January 30.

    Google Scholar 

  • Marriage, Maddison. 2018. “Wonga Receives £10m Lifeline from Investors.” Financial Times, August 5.

    Google Scholar 

  • McKillop, Donal, and John Wilson. 2003. “Credit Unions in Britain: A Time for Change.” Public Money & Management 23 (2): 119–24.

    Google Scholar 

  • McKillop, Donal, Anne Marie Ward, and John Wilson. 2007. “The Development of Credit Unions and Their Role in Tackling Financial Inclusion.” Public Money and Management 27: 37–44.

    Google Scholar 

  • ———. 2011. “Credit Unions in Great Britain: Recent Trends and Current Prospects.” Public Money & Management 31 (1): 35–42.

    Google Scholar 

  • “Need a Bank Branch? Then Head to Europe.” 2015. This Money, February 25.

    Google Scholar 

  • O’Connell, Sean. 2005. “Alternatives to Money Lenders? Credit Unions and Their Discontents.” History & Policy.org. May 3.

    Google Scholar 

  • “Pawn Sector Review.” 2018. Financial Conduct Authority, July 10.

    Google Scholar 

  • “Payday Loans After the Cap.” 2016. Citizens Advice, August.

    Google Scholar 

  • “Payday Price Cap Consultation.” 2014. Financial Conduct Authority, July.

    Google Scholar 

  • “Post Wonga Collapse, FCA Scrutinizes Payday Lenders.” 2018. PYMTS Alternative Finance, October 16.

    Google Scholar 

  • Ramirez, Stefanie. 2019. “Pay-day Loan Bans: Evidence of Indirect Effect on Supply.” Empirical Economics 56: 1011–37.

    Google Scholar 

  • Russell, Harriet. 2019. “As QuickQuid Collapses, Is It All Over for Payday Lenders?” Telegraph, October 26.

    Google Scholar 

  • Ryder, Nicholas. 2009. “The Credit Crunch – The Right Time for Credit Unions to Strike?” Legal Studies 29 (1): 75–98.

    Google Scholar 

  • “Sector Views.” 2018. Financial Conduct Authority, April 9.

    Google Scholar 

  • Sinclair, Stephen. 2014. “Credit Union Modernisation and the Limits of Voluntarism.” Policy & Politics 42 (3): 403–19.

    Google Scholar 

  • “Tackling Financial Exclusion: A Country that Works for Everyone?” 2017. House of Lords Select Committee on Financial Exclusion Report of 2016–17 Session, House of Lords Paper 132, March 25.

    Google Scholar 

  • Tergesen, Anne. 2019. “Some Companies Offer a New Benefit: Payroll Advances and Loans.” Wall Street Journal, September 2.

    Google Scholar 

  • “The Financial Lives of Consumers Across the UK.” 2018 (updated 2020). Financial Conduct Authority, June 20.

    Google Scholar 

  • “The Sustainability of Community Development Financial Institutions.” 2015. PWC, December.

    Google Scholar 

  • Thiel, Veronika, and Sargon Nissan. 2008. “UK CDFIs From Surviving to Thriving: Realizing the Potential of Community Development.” New Economics Foundation.

    Google Scholar 

  • Wilson, Graham, and Anthony Barker. 2003. “Bureaucrats and Politicians in Britain.” Governance: An International Journal of Policy, Administration, and Institutions 16 (3): 349–72.

    Google Scholar 

  • “Why Wonga Finally Called it Quits.” 2018. PYMTS Alternative Finance, September 4.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Economics, Villanova University, Villanova, PA, USA

    Craig McMahon

Authors
  1. Craig McMahon
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Craig McMahon .

Rights and permissions

Reprints and permissions

Copyright information

© 2021 The Author(s), under exclusive license to Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

McMahon, C. (2021). Fintech to the Rescue or Predators in Disguise?. In: Taming the Fringe. Palgrave Studies in the History of Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-70615-9_6

Download citation

  • DOI: https://doi.org/10.1007/978-3-030-70615-9_6

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-030-70614-2

  • Online ISBN: 978-3-030-70615-9

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation