Wonga-backer Balderton pours cash into British start-up looking to kill off payday loans

A British start-up seeking to bring an end to payday loans has received £40m in new cash from backers including an early investor in the now-collapsed lender Wonga. 

Wagestream, which has developed technology to give workers access to their wages at any day during the month for a small fee, rather than making them wait for a bulk monthly payment, raised £15m from venture capital firms Balderton and Northzone. It also secured a £25m funding facility from lending bank Shawbrook.

Peter Briffett, the company's chief executive and co-founder, said the cash would allow it to "accelerate the pace at which companies across the country liberate their staff from payday poverty and the disastrous social consequences that stem from it".

"The antiquated monthly pay cycle inflicts huge financial damage on household finances and its days are numbered. Too many people are pushed into a corner by in-work poverty and forced into the hands of payday lenders and high-cost credit," Mr Briffett said.

According to figures from the industry watchdog the FCA released earlier this month, complaints about payday loans hit a five-year high last year, up by around 130pc to 40,000.

The rise in complaints comes despite an effort by the UK financial regulator to crack down on high-cost lending fees by introducing limits for how much lenders could charge.

This crackdown prompted many borrowers to turn to claims management companies, to seek payouts after having taken out loans. One of the largest UK payday lenders, Wonga, collapsed into administration last year after it was flooded with compensation claims relating to loans made before 2014.

Balderton was one of Wonga's shareholders and, together with venture capital fund Accel Partners, had sought to save the business from going bust with a £10m cash injection. However, the business later filed for administration as claims had "accelerated".

Rob Moffatt, a partner at Balderton, said the fund had now backed Wagstream, as it had started to "restore the right balance" between employees and the companies they worked for.

"Companies used to take an active role in supporting the financial health of their users but this has slowly been eroded, to the extent where employees paid at the end of the month are effectively subsidising their employer for 29 days a month," he said.