Since the 19th century, payday lending has come far away from its salary lending roots. With new technology onboard it is now evolving and becoming more available and accessible. The usage of payday loans has enormously grown for the last 20 years. The USA hasn't escaped that tendency as well. Payday loans are used by Americans for essential and emergency expenses.

Lots of Americans prefer payday loans as a short-term small-loan alternative. They find it the easiest way to access credit with minimal hassle. Let's try to shape a profile of a typical payday borrower to know them better.

By demography

1. 18-44 years old. People in this category usually share a common problem – student loan debt. According to surveys, about three-quarters of Millennials and GenXers with a college education have about $40,000 in student loan debt. Very few of them have funds to spare. Unluckily, the majority don’t have a positive credit history because of outstanding debt. The only option for them is to turn to payday loans. Payday loans, with no hard credit checks, provide the service they need with speed.

2. Homeowners vs. renters. Homeowners are 57% less likely to borrow than renters, regardless of their age and income. In states where payday lending is allowed, 50-75% of all payday loan borrowers are renters. In most states with higher mortgage rates, the standard of living is higher as well. Lots of Americans prefer to rent instead of burdening themselves with the staggering mortgage debt.

3. Low-income. The staggering majority of payday loan borrowers are lower-income, working-class Americans who struggle to access credit. It's near to impossible for them to pass the hard checks of the three primary credit bureaus. The loans from credit unions and traditional banks are out of reach for these borrowers and payday loans are their top accessible option.

4. Without a four-year degree. 82% of American adults are more likely to get payday loans because of a lack of college education. Without it, finding a stable job can be very challenging. Most Americans have multiple jobs to sustain their living expenses. 

5. Parents, divorced and separated. American parents in the majority of cases are more likely to get payday loans than non-parents. Also, divorced and separated Americans are 100% more likely to get payday loans than those who are not.

6. Unemployed and disabled. Unemployment doesn't make accessing creditworthiness easier. While the essential living expenses become a major challenge the pressure increases fast. That's why about 15% of Americans get payday loans to fill in the gaps until they find another job.

By geography

Urban residents. Urban living is far more costly than in rural or suburban areas. The standard of living in cities is higher in spite of closer job opportunities. About 7% of urban residents have used payday loans at least once in their lives.

Underbanked lower working-class Americans

Underbanked working, lower-class Americans are typical payday loan borrowers. Banks pay little attention to them because of their low credit scores and lack of collateral. Americans who hang by a thread every day and live paycheck to paycheck. They use payday loans to get by and survive a little longer. 

Payday lending is custom-fitted to the needs of lower-class Americans by offering immediate access to cash. There are about 23,000 payday loan shops around the US and much more online. 

Summing up, payday loans mostly cater to the most vulnerable. Payday lending does not leave people in desperate situations. It gives people in need easy and convenient access to instant cash, not even when they lack collateral or a guarantor. Payday loans provide something that other financial institutions can’t: emergency financial support for all.

How financial organizations can improve payday loan processing?

To make loan disbursment efficient and with minimum risk, one should think of proper digital solution. There are plenty of lending software that can handle payday loans servicing. To chose a proper one, you should consider following features:

1. Availability of AI and ML. The combination of both can enrich the automated process and make is even more secure and predictable.
2. Analytics and reporting will help to have a bird view on the efficiency and prifitability.
3. 360 degree customer view. Never miss a thing and make right decisions.
4. Visual UI. Your risk managers will have to adjust risk strategies on the go and without IT department.
5. Omnichannel client engagement. Increase the pipeline and 100% automates decisioning.