A round of applause for Wonga please. Seriously. They have bought the concept of borrowing relatively small sums of money for relatively small amounts of time into the mainstream through their brilliant advertising and sponsorship of one of the most popular football clubs in the country. And with this, they have put the issue of how so many people in this country have to live their (financial) lives on a week to week and sometimes day to day basis onto the football pitch both metaphorically and literally. That’s not just something which should interest Wonga or Newcastle United-it should interest us all.
From a customer proposition point of view Wonga have used technology effectively, communicated smartly and executed brilliantly. If someone chooses to use Wonga, they can get money into their account in 15 minutes if they are approved. Since speed of access to funds is often a key consideration for all customers, including Wonga’s, they have delivered on that promise very effectively. Financial providers such as our high street banks and insurers could learn plenty.
Errol Damelin and his team provide a needed service which people can choose to use and which forces us to confront an important aspect of living in Britain today: for many people, it is about living their life by cashflow rather than interest rate.
But the whole Wonga debate is boring. And that’s because it has not been a debate. All I see and hear is masses of sanctimonious, bandwagon jumping dialogue, tweets and discussion. I don’t have a problem with people thinking, if they desire, that the product and service Wonga offers is dodgy/wrong/immoral/evil. Not at all. It’s just that nearly all the commentary has taken this standpoint and centred around the three letter acronym APR (I’m not going to bother to explain it because, it seems, we all know exactly what it means) which Wonga must quote to comply with existing consumer credit laws. Even aside from the fact that nobody ever pays the 4000% APR people bandy about, the debate has been depressingly one dimensional.
If people have a problem with Wonga’s (completely legal) product and services, where’s their corresponding discussion about the market failure which means thousands of people are using this, apparently devil inspired, company’s loans? Why are they choosing to use Wonga instead of going to their thoroughly trustworthy high street bank for a thoroughly reasonably priced overdraft with thoroughly reasonable penalty fees? Could it be because Wonga provides a realistic (and whisper it) valued alternative for these people?
Where’s the discussion and reasoning about why one of Wonga’s predecessors as sponsor of Newcastle United, Northern Rock, was different to them? Who is explaining why offering a 120% mortgage (at oh so reasonable APRs of 5 or 6 per cent) to thousands of people who now have homes worth less than they paid and who struggle to make their monthly payments has caused so much less damage to society than a £300 loan will cause?
Where’s the discussion about the fact that hardly anyone (that includes us, Guardian readers) really understands what an APR is, how it is calculated and what compound interest really means? Where’s the discussion about how we need to come up with different, innovative ways for all lenders to clearly communicate how much a loan is likely to cost in terms that people actually understand rather than percentages which they don’t?
Where’s the discussion about why Newcastle United have to suffer the moral indignation of signing a deal with an organisation who legally lends money whereas it is perfectly fine for Aston Villa to have Genting Casinos on their shirts? Is it because people going into these gambling establishments only ever walk out having made a tidy sum for themselves? Or do some lose money they did not have and end up getting into financial difficulties?
The problem of debt and its associated knock on effects is a very serious one for our society, as is evidenced by the work of people such as the MP Stella Creasy. It’s a serious issue and it requires a serious, measured, rounded debate which goes beyond the groupthink and opproprium of ‘legalised loan sharks’, ‘scum’ and ‘disgraceful APRs of more than 4000%’. A discussion which does not progress beyond the hanging, drawing and quartering of Wonga and into the related issues and about the availability of realistic, fair options for people who, every single day, have to live a life of constraints (not just financial) is not a worthy one.
So come on Stella et al. Wonga have kicked the ball to you. Pass it back and have a proper debate.
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