* U Money to trade on AIM in October

* Morses shares to be delisted

* Digital change necessitates realignment - Morses

Aug 13 (Reuters) - British sub-prime lender Morses Club announced an overhaul of its business on Friday that includes forming a holding company called U Money and listing new shares under that name.

Morses, which lends to people who struggle to obtain loans from mainstream banks, said once U Money is formed it will run its company as two distinct business - one its home-collected credit operations under the Morses Club name, and the other its digital lending unit as Shelby Finance.

The move comes as Morses' rivals Provident Financial and Non-Standard Finance scale back their businesses due to intense regulatory scrutiny in the sector, under fire for charging high interest rates on loans to financially vulnerable people.

Complaints against the sector exploded during the pandemic, pushing sub-prime lender Amigo towards insolvency while Provident closed its doorstep lending business.

Morses, which has a 130-year history, said shareholders will get one U Money share for each Morses share they hold. U Money stock is then expected to start trading on London's junior AIM market on Oct. 12.

"The recent acceleration of the group's digital transformation ... necessitates the realignment of the group's structure to allow it to better facilitate the ongoing development of the group's digital strategy," Morses said.

As in many sectors, an accelerated move to digital during the pandemic lockdowns has seen Morses ramp up its presence online. The lender said 65% of all lending was now cashless in its home-collected credit unit, while customer numbers in its digital division have jumped by 80% since the start of the financial year. (Reporting by Muvija M in Bengaluru Editing by Rachel Armstrong and David Holmes)