News and views
In the news
There has been plenty more coverage about Wonga again over the last week or so, following the publication of our annual results.
This was the first time we announced our results to the media, despite no requirement to do so, in keeping with our values of being open and transparent.
As ever there were plenty of opinions about the business and the role it plays in the financial landscape, but our approach itself was part of the story for The Daily Telegraph:
“On Tuesday, Wonga came out on the front foot and published its first annual report and accounts. Rather than merely filing its financial results for the 2012 year at Companies House and waiting for someone to notice, chief executive Errol Damelin faced his critics and explained in detail how Wonga makes its money and why, in his own view, the company is a “good corporate citizen”…. it is a young British company trying to explain what it does and why it does it. Better to be part of the debate than hide from the spotlight.”
And spark a debate it did, with well over a hundred articles and plenty of social media discussion. Here’s a summary of the main pieces and our take on some of them.
The Independent published a wide-ranging piece on the business and the controversy that surrounds us. Featuring quotes from critics, such as “profits show the consequence of the Government’s failure to act”, and from Errol, “[Wonga] provides a service for the digital generation”, the article described our business growth as having “all the characteristics of a dot com star.”
The Daily Telegraph ran an equally in-depth report with quotes from Errol about our customers, “the Facebook generation”, and Robin, our chairman: “Wonga’s profitability during 2012 was the result of the large scale of our operations and an unflinching commitment to provide a flexible and convenient service designed around customers.”
The Financial Times scrutinised our annual numbers over several pieces, focusing on our “international expansion” and our welcoming of “the idea of increased regulation”, whilst highlighting the “increased scrutiny” around short-term lending “amid concern that their annualised interest rates – of up to 5,853 per cent in Wonga’s case – have left many borrowers in acute financial difficulty.”
The Times presented a very different view on our customers – a view that is more consistent with the statistics and survey results that we make publicly available on OpenWonga: “This is a business whose typical customer is less likely to be a single mum on a sink estate than a hipster on a night out and in need of quick and ready cash.”
Faisal Islam, the Channel 4 Economics Editor, provided a “dispassionate economic” analysis, highlighting that “Wonga uses an extraordinary suite of variables to model likely default,” “is finding a profitable new model for short term business funding in the face of an intransigent banking system, unwilling to invest in humans to allocate capital to small businesses” and that “the banking system is going to become more like Wonga than the other way round.”
The post also discussed the wider context to the business and gave some balance to ongoing stories around the brand:
“Wonga is 100 per cent capitalised. Not a penny of leverage. Every pound of lending comes at the risk of its shareholders, and then the profit made on that. This is the ultimate “skin-in-the-game”. No question of too-big-too- fail subsidies, systemic threats or implicit taxpayer bailouts. For contrast, there was a furore when Wonga sponsored Newcastle United. It basically replaced Northern Rock on the Toon’s shirt, which the NAO calculates will have cost taxpayers £2bn.”
“If the Wonga bosses are right about their typical customers, then this is about squeezed living standards, which I have argued elsewhere is ultimately about the cost of housing. All the political focus on this controversial product is understandable. The complete lack of focus on the innovations, failures, lax political regulation that waved through trillions in mortgages during the boom years, is what I find remarkable. If politicians want to save people from Wongaland, I’d suggest policies to create disposable income by lowering housing costs. But that does not seem to be as popular or easy as targeting Wonga.”
The Guardian ran balanced commentary on our expansion, noting: “Wonga, one must admit, is a slick operation that gives its customers what they want. Processing loans rapidly is not a trick mainstream banks have mastered.”
The article closes with an argument for a “clear case for placing caps” on amount of interest charged, despite previous governments, and recent independent research from Bristol University, arguing against rate caps.
Leading with the attention-grabbing headline on the front page, “Wily Wonga and the profit factory,” the Metro was less objective, reporting we have been “raking in £1 million-a-week from cash-strapped customers” and featuring a number of quotes from critics, such as:“this is the only industry that makes more money the less able people are to pay them back”.
Unlike credit cards we want people to repay in full and on time. Our transparent business model encourages people to settle their loans by the due date (the vast majority of our loans are paid back on time or early), and we use using industry-leading risk technology that declines 75% of all first loan applications. We only want to responsibly lend to people who we think can afford to pay us back comfortably, and on time.
The Daily Mail continued its focus on our misrepresentative annual percentage rate (“charges stratospheric annual interest rates,” “profiting from the misery of the poor and encouraging them to sink deeper into debt”), as did the Mirror - alongside quotes from Errol: “Our customers are the digital generation, people who wouldn’t contemplate waiting three weeks for a bank loan.”
The bigger picture
As ever, we are in the media spotlight and there is considerable scrutiny and debate over everything we do. We accept that. We’re a private company, just six years old, that has rapidly become a household name - we’re growing and learning in a very public way, and building for the future as reported in the Times:
“It seems too good to be true: a British company, innovative in its field, developing neat technology, planning to double its well-paid workforce, making money available to SMEs and so far-sighted that, rather than dole out its profits in dividends to shareholders, prefers to recycle them back into the business to create longer-term growth.”
The bigger picture is about continuing to use technology as a disruptor, responding to changing consumer habits and building something long-term, sustainable, digital and genuinely ground-breaking. We don’t get everything right and will continue to learn from our mistakes, but likewise we’ll keep focused on what we want to achieve and why: building a global digital finance business that gives customers clarity, control and choice.
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