Mapping the Customer Journey of the New Generation of Payday Borrowing

A TFI research by Ronnie Das, Robert de Boer, and Frederik Situmeang
Posted on May 03, 2021

Have you ever considered taking a loan from an issuer other than a bank? Payday loan issuers are able to offer loans with little to no barriers, and at a faster rate. However, they are known to target financially vulnerable people, often resulting in unexpected problems for the consumer. Because of that, there has been an increase in regulation on the practices of these payday loans business. In this TFI research, Ronnie Das, Robert de Boer and Frederik Situmeang investigate the payday lending and borrowing behaviour post regulatory interventions in the UK.

Download the report or read about the summary below to find out about the results

Payday loans are a controversial High-Cost Short-Term Credit – HCSTC – option with a reputation of targeting financially vulnerable people with poor credit ratings. They are considered ‘predatory’ in nature and at times referred to as ‘legal loan sharks’ by the Financial Conduct Authority – FAC (FCAB 2013; Goff and O’Connor 2011).

Between 2008 and 2012 the UK market grew rapidly with lenders issuing approximately £10.2 million in loans and generating revenue worth £2.8 billion (FCAB 2013; 2013). An exponential growth of the market up to 50% per year is a testament to the demand for this type of credit (CMA 2015). In 2015, the FCA introduced strict financial regulations and interest caps against payday lending systems in a bid to protect consumers. In May 2016, Google banned opportunistic payday loan advertisements (BBC 2016) which has resulted a slowdown in new lending companies coming on to the market (CMA 2015).

Since the regulatory changes in 2015 there is little research evidence on the transforming lending and borrowing behavior in this industry. In this study, we present a comprehensive journey map of UK middleclass peoples’ payday borrowing journey and lived experience with these loans since the regulatory changes. We use the famous Moments of Truth – MOT – model popularized by Google in understanding and charting customers’ borrowing journey across four months of truths: Stimulus, Zero Moment of Truth – ZMOT, First Moment of Truth – FMOT, and Second Moment of Truth – SMOT.

We used a three staged mixed qualitative method approach:

Stage 1 involved in-depth life story interviews (Holt 2002; Fournier 1998) with 15 selected respondents who have either taken a payday lone in the past two years or are considering taking a payday loan at time of the research. These interviews were carried out between July and August 2020.

Stage 2 of data collection required the participants to maintain a logbook of encounters with payday loan advertisements because of pre-instructed search engine and social media search behavior. We used two groups for this observational exercise. Group 1 had either taken a payday loan in the last 2 years or was considering doing so. Group 2 had no history of payday loans and was designed to maximize insights generated in developing comprehensive recommendations.

Stage 3 consisted of follow-up interviews to understand the effect of pre-planned actions taken during the observational exercise and resulting influence on the subject’s decisions making and action.


Findings from our study show that unlike other financial product related customer journeys, the journey to obtain (and lived experience) a payday loan turned out to be much more complex than previously thought. Our primary findings indicate that payday loans are not just obtained by people with no financial education belonging to lower income groups. Many respondents in our study self-identified themselves as UK middleclass, with a combined average salary of £23,248 per annum. Most respondents admitted not having a great knowledge of payday loan interest characteristics and the implication of non-payment. However, three participants in our study had explicit knowledge of interest and repayment calculation which derived from their higher education or their experience with a previous payday loan.

Two dominant themes from our participants life stories were identified as: external stimulus and impulse purchase behavior. Previous studies suggested payday loans are obtained during emergency situations and as a last resort, our study suggests that some of the described episodes may appear to be important and necessary, but ultimate purchase intensions were more impulsive than required. Our respondents either obtained or aimed to obtain payday loans towards purchasing vintage cars, renovating their garden or home, travel and holiday, leisure and entertainment such as clubbing and social affairs.

There were numerous thematic episodes like these where our participants clearly indicated that they had no active intension of obtaining a payday loan, until they were exposed, to a pressured social scenario, or an external stimulus in the form of digital advertisement or affiliate marketing. Despite claiming to block active payday loan advertisements, social networks silently play a role in inflating and influencing people’s purchase desire. It is important to note that not all the need recognition stories in our interviews were driven by impulse. There was emergency or extenuating circumstance that drove some participants to obtain a payday loan.

A further reason why people turned to payday loans was to consolidate existing debt resulting from defaulting on previous regulated bank loans. The Zero Moment of Truth – ZMOT – in the journey is short lived and information is often searched based on highest lending offer or monthly repayment value. Not understanding the importance of APR and full interest rates resulted in dire consequences for many of our participants. During the First Moment of Truth – FMOT – a lender is selected based on reduced complexity or paperwork and background checks. Often participants read independent reviews to get a greater understanding of lender reputation. Some consumers are lured into taking further loans by constant email and telephone marketing messages. Respondents in our study admitted to borrowing in order to repay previous debt related interests, initiating a vicious cycle of debt.

Finally, the lived experience (or Second Moment of Truth) does not paint a picture of a positive experience. In one shape or form respondents had defaulted on their repayments or are still working to pay off their interest through more borrowing. Not understanding interest repayments was identified to be the biggest issue, followed by complacency about consequences for non-repayment. Instead of seeking help from friends, family, partner, or government agencies they fail to recognize it as an issue and actively ignore the possible consequences. From most of the interview responses it was evident that borrowers do not like to talk about their borrowing experience whether its positive or negative. They believe that social stigmas are attached to payday borrowing and the borrowers are often perceived as ‘financially irresponsible’ belonging to the ‘working class’. In addition to payday lenders, respondents also commented on how debt relief companies show ‘predatory’ behavior during this time of crisis. Respondents pointed out that without appropriate knowledge of a borrower’s background debt relief companies often force them to take a settlement for their profit. Very rarely could candidates stipulate the consequences of a settlement that often ruins their financial prospect for a very long time.


Government and policy makers need to realize that borrowers’ needs do not change overnight because of exclusion from traditional lending systems due to a poor credit history. Instead, people living on marginal wage turn to risky borrowing behavior without fully understanding the consequences. Despite stricter regulations, it is obvious there are no clear guidelines on whether previous payday loan borrowers can be tempted or even pressured to obtain another payday loan as discussed in the following stages based on the experiences of a group of our participants.

The previous legislation may have restricted the number of loans that can be obtained from one lender, but due to regulatory loopholes our respondents have admitted to switching companies to avoid such burden. Regulatory authorities must consider grater information sharing and control across lenders with strict background check protocols. Also, data sharing in the industry must be tightly controlled to stop upselling, cross selling and other predatory behaviors. Rules and regulations also need to be reviewed regarding how consumers digital footprints are used to selectively target people who are likely to fall into the vicious cycle of debt due to limited self-determination. Government must also review Citizen Advice support systems and make them more reliable, impartial, and accessible. More family, friend or influencer-based invention is essential to stop people repeating the same mistake, while more targeted educational advertisement and messages will be helpful in transforming people’s mindsets towards irresponsible borrowing behavior.


  • BBC News. (2016, May 11). Google ban ads from Payday Lenders. BBC. Retrieved from:
  • CMA. (2015). Payday lending market investigation: Final report. Competition & Markets Authority. Retrieved from:
  • FCAB. (2013). Payday Loans: Are they causing a problem for people in Flintshire? Flintshire Citizens Advice Bureau. Retrieved from
  • Goff, S., & O’Connor, S. (2011, December 7). ‘Legal loan sharks’ target working poor. Financial Times. Retrieved from:
  • (2013, November 25). Government to cap payday loan costs. Retrieved from:
  • Holt, D. B. (2002). Why do brands cause trouble? A dialectical theory of consumer culture and branding. Journal of consumer research, 29(1), 70-90.