What’s awesome about the Internet is how it breaks up monopolistic markets where middlemen unfairly gobble up outsized fees, leaving us little choice but to keep paying them. It happened with software, it happened with music, and it’s happening now with media. But there are a few sectors of our economy that have stayed mostly undisrupted—one of them is banking.
Sure there are companies like eTrade that opened up the market for buying and selling stocks. But it didn’t fundamentally change the market that much, it just moved part of it online. The thought for a long time was that banks needed to be too controlled, too regulated to be turned over to the Wild West of the Net. Then the credit meltdown hit and we saw just how reckless these so-called safe and regulated institutions were.
The time is right for the Web to unleash its full market-destroying power on the finance world and while I was in the UK I found a company making a promising start: Wonga.
Now, Wonga would hardly say its role is to upend the world’s financial institutions. But it’s one of the most dramatic examples I’ve seen of a Web company using what the Web does well to remake lending.
Wonga gives people a way to borrow small amounts of money quickly, between £50 and £200 for first time borrowers to be repaid between five days and 30 days. (Returning customers with a good repayment record can borrow up to £750.) A would be borrower gives Wonga just eight pieces of personal data online, and its algorithms find 1800 data points based on that within 2 seconds, making a rapid decision about whether that person is a good or bad short term credit risk. If approved, the money is wired into the borrower’s account within the hour. And, the borrower gets to decide when to repay the money, with no penalty for early repayment. One of the most notable things about the UI is a sliding scale, which shows exactly what fees someone would owe Wonga for every dollar borrowed and extra day before its repaid. No fine print and formulas to calculate; the cost of every dollar you borrow is calculated for you.
Wonga was founded by Errol Damelin, a serial entrepreneur who previously started a supply chain software company named Supply Chain Connect. He sold that company in 2005 and decided he didn’t want to build another enterprise software business. (Smart move.) So he traveled around the world looking for ideas. In the U.S. he became captivated with payday lending companies—an industry of strip mall storefronts that generates a whopping $12 billion in fees.
There was a clear demand for short-term loans to tide people over or take care of emergencies. But it was a polarizing industry, seen as predatory and exploitative. Damelin spent more than a year digging into it, and brainstorming with well-known UK angel investor Robin Klein on how to rethink it and make it better.
Two things excite me most about Wonga. The first is that it isn’t peer-to-peer lending. Peer-to-peer lending in a social sense, like Kiva, is one thing, but I’m not convinced peer-to-peer lending for profit works or scales. It feels a bit like trying to apply Web 2.0 ethos of wisdom of the crowds and social networking somewhere that it just doesn’t fit. Instead, Wonga has raised $28 million from Balderton Capital, Greylock Ventures, Accel Partners and Dawn Capital and is loaning out its own cash. In its first year of business it did more than 100,000 loans, for an average of £250 each, and it’s already profitable. “This is the best business I’ve ever been in,” Damelin says.
Second, it’s the first time I’m aware of that a bank that has actually aligned its incentives with what’s right for the customer. Put another way: Wonga makes its money when you repay the loan, not by keeping you in debt longer. Think about it: Credit card companies make the most of their money from people just able to make their minimum payments every month. And payday advance chains make most of their money by rolling over your debt to the next payday.
Critics have said that Wonga is usurious by charging a 1% interest fee per day. But that’s a knee-jerk response. Wonga is simply charging a premium because it allows borrowers quicker access to cash than any other service, the same way a town car is going to charge you more than a cab off the street. And because it only makes money when a borrower repays the amount, there are no tricks to keep you in debt longer. Wonga’s ideal customer is someone who uses the service two to three times a year and always repays on time, Damelin says. If more financial institutions had this basic orientation to doing business, we wouldn’t have had the credit meltdown because people would have known exactly the risks of agreeing to ARMs and zero-down mortgages.
Sure, you can say Wonga is dangerous because it’s giving people an easier way to live outside their means. But that’s a bit like arguing giving kids condoms encourages teenage sex. You can’t change human behavior, but you can help make people safer.
Now here’s the downside on Wonga: It’s only available in the UK, and it will likely stay that way thanks to a bevy of licenses and regulations entailed in getting near the finance sector. It’s even worse in the US, where each state has its own laws. Even a copy cat business might be cost-prohibitive in the U.S. because of all the state-by-state regulations and red-tape.
As our taxpayer dollars continue to bail out the same lousy institutions, it’ll take innovators like Wonga to force real change in the finance world. But in this country, it’ll need an assist from the government as well.
Typical 2689% APR? That seems really high to me, even though I’m sure there is a lot of risk in these short-term loans.
Does anyone know how brick-and-mortar locations compare?
2,689% is on par with Brick and Mortar payday lenders. Moving predatory lending from storefronts to the web does not equal revolutionary. Revolutionary would be to take the same funds, stretch payment over 12 months and offer the homeless or off-the-grid Americans an opportunity to be entrepreneurs. This would make them consumers as opposed to beggars and help lift the economy. Not to mention self-filled, unaudited credit scoring lead to Americans over leveraging themselves. Another revolutionary idea. Lending is more about human character than financials.
But the article is on par for an idealistic tech writer.
Guys, guys, guys, this is so naive. High APR does not equal payday lending or even high cost. It’s a symptom of short term loans (small number multiplied many times over to fit with an out dated convention). I’m a Brit who has used Wonga over a credit card and I would do it again any day. A week-long loan is good value for the odd urgent situation and you know everything’s going to be settled and forgotten about quickly.
I dont know of any other services where you can play with all parameters of the loan and then get an instant decision at any time. Full marks from me and it has revolutionised the way I use credit and manage my cas flow.
There is something better for poor people and developing nations, called micro finance , pioneered by Mohd Yusuf.
They charge 25% per annum
“2689% APR”
People are free to be screwed if they want to.
Wonga is nothing new. This service has been around for years at Kiva.org.
http://www.kiva.org/about
BTW. You’re all poor now, or will be soon.
But it actually is different, its not peer to peer. They are funding the loans directly to the borrower with their VC’s money
Wonga is not peer to peer. It is an Uber Financial Site vs lowly borrower.
All the same — usury is a fancy name for loan shark. “2689% APR” would make any mafia proud.
You know the biggest market for pay day loans? Soldiers. Sad.
“You know the biggest market for pay day loans? Soldiers. Sad.”
Well, financially strapped people make a large bulk of our military volunteers.
And I’m glad for that.
Look if you’re in need of cash, you hustle. Whether it’s selling your body for sex or for war, it’s all alright by me.
You want my money? I call the shots. Lap dance or foot patrol. I’ll let you make the call.
You guys are such whiners.
You’re welcome to your views, but you’re applying US payday stereotypes to a UK financial company that you plainly know little of.
The only thing in common between Wonga and the payday lending model is the short-term nature of the products.
As the post makes clear, we use the world’s most advanced decision technology to ensure we only lend to people for whom the service is right. That means a minority of first-time applicants are accepted and we have very low default rates as a result.
Our customers are young professionals and families with a decent income and access to other forms of credit. In surveys they tell us they prefer using Wonga because of the short-term commitment, high level of service and flexibility we offer. Yes, we would say that, but it’s fact.
It’s a genuinely new choice in a very old fashioned and slow moving market and loans are not tied to paydays or given to anyone with proven employment.
APR has been mentioned several times in the comments and we’d be the first to admit it’s a huge number. But surely the fact that the APR goes up as our loans become cheaper (the shorter the loan the bigger the APR) tells you something of the potential for this measure to distort the real cost. Either way, we clearly show the APR and the actual cost of every loan.
We are also the first company to allow borrowers to define the exact size, length and cost of their loan before application begins, showing all the information in the most transparent way possible. In an industry where most credit products are rigid, long-term and often come with hidden charges, this is truly a new and disruptive approach to lending, whether you like any form of credit or not.
One of the reasons it’s so difficult to actively participate in a major scale in the Finance Industry is because of the levels of risk that you’d be exposed to and regulators have minimum investment levels which are very large.
There’s another side of the coin to your argument in that the web could make it so easy for normal people to start dealing in complex financial instruments (and we all know what happens then…). If the PhDs in finance couldn’t figure all this stuff out then what chance do normal people have.
well the problem is that there really wasn’t anything to “figure out”. most of that stuff is hocus pocus garbage based on exceptionally flawed logic (as we’ve recently discovered).
Exactly. We saw how “pundits” kept telling people that prices would always go up during the first bubble and if people had more access to financial markets this would just make things worse.
There were places where people in charge knew that the products were crap and they did very well. If you add normal people into that mix it’s pretty clear that adding the web into the equation is a bad thing. The web inherently makes everyone equal – rumours will fly all over the place through twitter and places like techcrunch will republish them galore creating madness like never seen before.
The fact is some of this stuff should be left to the people who at least have some clue as to what they’re doing (ok they won’t get it right all the time)
I think john is referring more to CDOs having AAA ratings. total vaporware.
I would argue that the PhD’s did figure it out, which is why we are in this mess to begin with. IMHO, bankers are smarter then we think because they made their money, brought the economy down, got bailouts, and are continuing status quo unfettered.
check-cashing, payday loans, etc are usually highly regulated at the state level. and it’s gotten even more so over the last few years. I would be surprised if the typical brick & mortar shop could get away with charging 2689% interest.
You’re misunderstanding APR and actual interest charged – not the same thing. APR is an annualised representation of the rate of charge. It’s actually garbage when it comes to loans of less than a year. If you aplied APR to bank charges (not required for them), you’d get much scarier numbers.
did any one notice that techcrunchs post launch by 47 retweets?
“What’s awesome about the Internet is how it breaks up monopolistic markets where middlemen unfairly gobble up outsized fees, leaving us little choice but to keep paying them.”
Uhm… a bit biased? These internet companies become the NEW middlemen.
If the new middlemen makes it simple for everyone to compare and shows all REAL costs and charges, I’m happy to live with that.
Sarah Lacy: Please give an example of “middlemen” acting in a “monopolistic market.” Please define “unfairly,” “gobble up,” and “outsized fees.”
And as for “leaving us little choice but to keep paying them,” how small must a choice be to be little? If I have only one choice, is it by definition big or can it be little? If I have five equal choices are they each little? Would I be worse off with five little choices than with two big ones? Or one big one?
if you only have one choice, you have no choice.
Besides government imposed monopolies, please give an example of a monopolistic market, where there are no other choices.
“And because it only makes money when a borrower repays the amount, there are no tricks to keep you in debt longer.”
Hey guess what? Payday lenders don’t make money till you pay them either. Even if all you can pay is the interest on a payday loan, you’re still PAYING them.
This company doesn’t need to “trick” anyone into being into debt longer since it’s interest rate is exorbinant.
Don’t get me wrong, high interest rates like this are often necessary since the risk involved with these types of loans is quite high, but don’t pretend that wonga is any more moral and good than a b&m payday lender.
They all make more if you pay them back later.
From Wanga:
“If we can’t collect payment from your debit card on the day you selected you’ll have broken your promise and will incur a £10 administration fee…”
Guilt and rhetoric aside, this is just the same old scam.
Trust me, i have friends very active in “short term unsecured” lending and the 2800% APR is just the start of the game. well more than half (80% in my old kentucky home, at least from 40 years ago to today), roll over with fees every 2 weeks. it is usury, legal, sad, and needed, alas. i work for a living, have for several decades, and the guys i know making money at 15000% interest (and yes, they UNDERCUT loan sharks) in payday and other variations, DO help many, many people, but it’s a spiral to the drain.
Was this written by their PR department? What happened to commons sense and journalism? This article is full of ridiculous hyperboles.
hey, don’t you know she writes for BUSINESSWEEK? how could you say such a thing? today we find journalistic ethics being higher than ever, so your comment really comes out of the blue for no reason!
is she writing in the paper copy .. cause there is no links in the post
Humor++! It’s always April Fools Day in Sarah Lacy’s world.
How is this different than some company doing payday loans? Sure, they are small amounts, aren’t most payday loan companies doing this already?
There is no single link in the post. I felt strange, cause in the middle of the post I saw myself scrolling to the bottom to click on the link … when i was right about here :
“promising start: Wonga.”
Sarah, I must say I missed the “links” – haven’t felt that way for a long time.
Frankly it doesn’t seem so disruptive to me and not so different from mortgage that people cannot afford, simply it’s short term.
«But that’s a bit like arguing giving kids condoms encourages teenage sex»
Ironically that’s true it’s a phenomenon called “risk compensation”.
I don’t understand how telling you (with cute cute sliding bars) how you’re getting fcuked makes it okay. Trust me, at 1% per day, you’re getting fcuked… This cost of this service is usury and hopefully never makes it to the North America market. I’m incredulous that the author thinks that this service is any better than the host of traditional services given the astronomical APR.
Haha. What a silly article; it really shows a misunderstanding of what the finance world is about. It’s not about a $250 payday loan to someone; the entire payday industry gross profits were $12billion, while JP Morgan’s has a $2.1 trillion dollar balance sheet. Do you really see Wonga appending Goldman Sachs in underwriting debt? Or a company like Wonga making the credit decision in purchasing a new house?
They day can’t come soon enough. I will celebrate the day when the banking douchebags are getting outsourced and making 30k a year. That is all they deserve. They are rather useless people. They are nothing more than the tollman in front of a gate, charging users a fee to enter. In this case, the fee is to participate in modern commerce. There is no reason why their profits should stay so high or why their market can’t be more efficient with todays technology.
How is it any different from this scam – http://digg.com/u1964k
“it didn’t fundamentally change the market that much, it just moved part of it online”
Which is exactly what has happened with payday/loanshark loans and Wonga.
“Wonga makes its money when you repay the loan, not by keeping you in debt longer.”
Sorry, but this is not how it works. If interest is charged per day, then the more days the loan stays unpaid, the more interest Wonga earns- just like any loan, credit card or otherwise. The money is made over the life of the loan, not when it’s repaid.
The laws of finance are like the laws of physics- there’s no changing them, with the web or anything else. Plus ca change…
I am inclined to agree that a nice web2.0 slidy bar doesn’t really change the fact it is a pay-day-loan service.
I feel ashamed that Wonga has managed to brain wash so many journalists on both sides of the Atlantic. This service will cause long term social problems and put a lot of consumers into debt spirals. Similar services were launched in Scandinavia and Baltic states already in 2006 and they have managed to create problems in 10% of the working population.
Wonga should be stopped and harshly regulated ASAP.
A bunch of solid points have been made in these comments. I’d add to this by saying, this model cannot sustain itself as there are so many flaws in it, someone is bound to create and deliver a superior product.
Yep, the same thing happened with the railroad and the invention of gasoline and the combustion engine.
Steam Engine == Dialup
Combustion Engine/Gasoline == Broadband
Our service has a Typical 2689% APR, but bear in mind that APR is a measure of annual interest and a Wonga loan is only for between five days and a month.
That is just a rip off ! incredible that people are ignorant enough to sign up for this crap. and more incredible that other people promote it with the same ignorance.
its really funny what people get away with in this society.
The number of egregious errors in this article is disgusting. Couldn’t this have been proof-checked by Arrington’s financial advisor?
Banking is monopolistic? Is that why there are 4800 of them in the US? (I could ask the same about software and even music.) Perhaps you meant “collusive”? Maybe you just meant mired in old ways of doing business. Certainly not “monopolistic”.
The lack or failure of banking regulation means that we should have less regulated financial intermediaries such as Wonga to upend the business? Huh?
If Wonga is charging 1% per day, then it *does* make more money the longer people hold the loan. Let me explain this: If I borrow $100 today, I owe $101 on Tuesday and $102 on Wednesday. And there is not a single financial intermediary that makes money if people don’t repay.
Finally, it seems to me that Wonga’s target market (the payday loan crowd) doesn’t have the “8 pieces of data” required to even be considered as a credit risk. Hell, they probably don’t have Internet access either.
I taught economics at a leading university. You just flunked my 101 class.
I pitty your students…
Of all the narrow minded, self rightious comments left on this post, I would expect an economics professor to be more than a goody-two-shoes nay sayer…
If you have bothered to actually visit the Wonga site and read some of the FAQ’s and explanations about the APR, maybe you would realize things aren’t so black and white, but I guess people who “teach economics at a leading university” already know everything and only need to read the headline.
did you know “professor” that UK charge HORRIFIC overdraft fees?? If you are a Lloyds customer, and overdraw just 5 pounds, they will smack you with a 30 pounds penatly – PER DAY??
Whats the APR on that? oh, they don’t need to publish it.. All they need to do is state this fee will be charged in the smallest print on the 11th page of your current account Ts&Cs..Why? because in the UK 6 big banks (5 now..) control the market and the regulator…It’s as simple as that!
Wonga offer that person an alternative – take 200 pounds for 10 days until your paycheck comes through. How much will it be? Only 20! compared to the hundreds of pounds your bank will charge you – that’s NOTHING. They have the decency to admit they are expensive and tell people why. they also have the decency to allow their customers to repay early if they find a cheaper source of credit, no fees, no hassle. I don’t see the big banks being so kind..
So IMHO, even if you decide Wonga isn’t for you and you don’t think it’s the best thing since sliced bread, it wouldn’t hurt you to do a little research before badmouthing everyone and everything – isn’t that how you teach your students to form an educated opinion??
Not to interrupt, but Lucy is making a classic straw man argument. Nowhere did the OP indicate that overdraft fees were not large, in fact OD fees have nothing to do with this discussion at all. This is about short term lending, OD is a fee for borrowing money when you don’t have a lending arrangement.
actually, her point is about relative costs . . . she’s assuming that a wonga loan would help people avoid the ridiculous overdraft fees charged by banks, so is actually a better deal . . . and that is a valid point.
what percentage of payday-type of borrowers even have an email address?
Umair Haque actually wrote a thoughtful blog post or two on this crap company a few months back. as opposed to this drivel.
http://blogs.ha...onga_redux.html
Wonga is ridiculously usurious and should be illegal.
1% interest/day = 3777% APR
aka, a scam to take advantage of those who are bad at math.
Also, the fraudsters/wonga’s interest is definitely NOT in line with their customers’. The longer the customer takes to pay, the more the fraudsters earns.
Desperate VC’s have gone into predatory lending (via their proxy). Good to know!
That’s where they’ve shown to the general public their true face that we ALL knew about FOREVER.
hehe.
Sarah, this is an utter knee-jerk post from you. Don´t get me wrong, I have admired all your posts and analysis up till now, but you really lost track on this particular topic:
a) Paydayloan services are not a threat to traditional banks. They only serve communities that are unattractive for banks. No bank is interested in opening branches in communities where payday loan kiosks are.
b) Payday loan companies do not compete with traditional banks. They cater to a neglected segment of the lending market.
c) Wonga is merely a migration of brick-and-mortar payday loan service online. There is no innovation here. This model is already in Scandinavia and Estonia. The companies even offer mobile services, i.e. you can take a loan on the fly.
d) Usury – There is a reason why many government in Continental Europe hinder business models like Wonga. Without regulation, they will sprout out like mushrooms everywhere looking to make the last buck from poor, uneducated and ill-informed consumers.
e) An online payday loan service like Wonga is even worse than a brick-and mortar service because it entices consumers to apply for loans from the comfort of their home. Unlike the latter, Wonga makes payday loans pervasive and unbiquitous for every person!
e) Offering an online payday loan service like Wonga can therefore not creatively disrupt the traditional credit market run by banks in any way.
Padayuk.co.uk is the largest online payday service in the UK i believe. Its backed by CompuCredit a major U.S. sub prime credit company. With its own FTC issues over aggressive lending practices.
Wonga puts a PR spin with its Web 2.0 name and fancy VCs but its essentially just another payday loan service probably not run as well as the loan sharks with more experience.
As for the fees, they are predatory but necessary. Collecting on defaults are impossible therefore the interest must support the risk.
Is there really an editor at Techcrunch? Any?
Yes, one of your writers can come up with an idiotic analysis like this one of a payday loan company, but isn’t there any type of filter for separating crap from decent?
From the headline I thought this was going to be about derivatives or CDS.
Wow, all this breathless excitement and weak analysis! Wasn’t this article supposed to be submitted to Fast Company, not Techcrunch?
Techcrunch reputation continues to drop… and drop…
this article and company is bullshit, but i’ll give you another chance since you are a woman.
Wonga name.
You might actually try using the scale on their home page. Select a 200 pound loan over 7 days.
What’s so great about a finance company that wants you to pay 10% of the original loan amount in ‘interest and charges’ at the end of a 7 day loan? If you’re going to borrow from this company, prepare to bend over and take it.
Sorry, but I don’t get the value here. Fully automated lending systems should offer superior pricing.
That was a really idiotic article.
Maybe after online payday lenders, Sarah could also talk to the PR departments of online gambling businesses, online porn businesses, and also explore the use of the Internet by the Columbian drug cartels. All very “disruptive” in their own right.
“Heyyy, hooo, I know about the Internets… Its revolutionizing everything! look at thiss… wongaaa, wongaaaa!”
How Wonga should kill finance industry… What a ridiculous title! So can we say online banking websites kill the finance industry, too?
WONGA IS A PRODUCT OF FINANCE INDUSTRY. There is nothing new about it. It’s not P2P, its not low APR (3000% APR OH MH GOSH!), its not lending to 3rd world like kiva…
So stop writing articles as if you’re Wonga’s PR dept!!
I live in the UK and I’ve used Wonga.
No, I’m not a poor teenage mom who is a serial payday loan user..
I’m a single professional living in London that just had it with roommates and moved into a flat on my own last month – the deposit and 6 weeks rent upfront didin’t leave much breathing room on my credit cards and i didn’t have enough money to book a holiday in September with my friends to ensure my place at the great price the was offered at the time.
So I used Wonga – and it was great. got the moeny in my account within 20 minutes and transferred it to my friend to make the booking. i got paid a couple of weeks later and Wonga charged the money off my account.
Paying for my Wonga loan? 35quid. Not missing out on a holiday with my best friend? priceless!
There are hundreds of similar “payday loans” sites out there – what made you single out these people?
@professor of economics at a leading university – If the Wonga customers don’t have the 8 pieces of data nor internet access, how would they apply and get accepted for a Wonga loan?
@aj – above applies to you as well…did these people not pick up on the fact that Wonga is only online? No email address, no internet access, no Wonga.
@Andrew – Wonga states their APR is TYPICAL, as do all the banks, meaning the rate that some 66-67% of customers pay on their loan. If you wanted to practice your maths, you could then figure out what the typical loan is that a Wonga customer takes.
Also, why compare Wonga to Kiva? Wonga supports Kiva, but isn’t trying to be Kiva.
It seems obvious that the majority of people reading TechCrunch are not in need of short-term cash. You have overdrafts and credit cards and all manage to live within your means and therefore cannot relate to people who need to use Wonga.
@domr – I think Wonga has been singled out because they aren’t a “payday loan” company. They are trying to be open and upfront about their service and they encourage people to seek alternative sources for money if they think they won’t be able to repay within a month. They don’t throw wads of cash at every person who visits their site. They don’t promise £1000 on your first visit with no credit check. I like the language they use to relay their message – transparent, responsible, trust. They show the cost upfront and tell you the collection process in their FAQ’s. I don’t feel like they are hiding anything. I don’t get that same feeling from “payday loan companies”, which is why I chose to use Wonga once when NatWest f* my bank account up.
I don’t understand all the haters. Wonga is just a good resource to have available, much like your dependable overdraft or parent’s open wallet. For those of us without the aforementioned comforts, there is Wonga.
Sorry, Wonga is just a payday loan company dressed up with web 2.0 and a catchy name and tier 1 VCs (the reason they probably get breathless TechCrunch attention).
They do nothing different then all the rest. The much larger competitors all do it online too with instant transfers, etc.
They certainly try to spin themselves different, but they aren’t.
“But that’s a bit like arguing giving kids condoms encourages teenage sex.”
Sorry to point this out to you as you’ve been hammered so bad about the rest of the inaccuracies here but..
Giving condoms to kids DOES in fact encourage teenage sex.
Also making people feel safer in situations where “they’re going to do it anyway” encourages them to behave more irresponsibly so when things do go wrong the results are usually more catastrophic.
In some situations feeling unsafe is a good and healthy thing because you are NOT safe.
IN sport for instance, on introduction of protective equipment minor injuries are usually eliminated (Yay billy won’t have cut’s and bruises anymore) but serious injuries tend to increase massively (Boo billy broke his neck). This is NOT a good thing.
Wonga is an innovative idea. It’s unfortunate that it is available only in UK
Seriously? Search “Payday loans” on Google. there are numerous similar services in the U.S.
To “kill the finance industry,” you can’t +participate+ in the finance industry. Period.
Real threats to banking involve “alternative” (or “complementary”) currency approaches which allow people to lend/borrow/trade completely outside the State-sponsored bank monopoly on money. Think: Frequent Flyer Miles, or “e-dollars” based on a basket of real or virtually valuable “goods.”
The internet has revolutionized other industries by offering a totally new model for meeting an existing need — in this case, the need to transact to manage personal life-choices. Wonga might be innovative in that it leverages digital value for real money, but in order for it to be truly “new,” it should work with “virtual” money accepted universally, e.g. for booking that online vacation.
Surely someone has come up with such a digital/parallel money concept by now though — e.g. Bernard Lietaer’s “Terra” currency unit, or Second Life “Linden dollars,” but on a grander scale…?
Or why not think “beyond money” — like @missrogue’s “whuffie” — to digital, money-less “social capital”?
Maybe by creating a parallel market based on _a totally different transaction mechanism_, the Net — not Wonga — could actually manage to “kill the finance industry.”
I look forward to the day when micro and larger finance such as this usurps the traditional lending mechanisms that keep everyone rolling in the machine. Funnily enough it’s just a Western thing that we don’t share as clusters of families.. a poverty mindset, prefer to be blinded maybe..
Cheers for the read.
The advice is:
Don’t spend money that you don’t have.
Then you don’t have credit problems.
Just to defend them a little bit – Yes, payday lenders prey on the desperate, but they are short term and high risk, so the APR is understandably high.
With regards to Wonga in particular, they seem to be fairer than others as they charge relating to the amount of time borrowed, whereas others charge a standard amount per £100.
Just cant stop my self to comment on your blog. Good post.
The Scandinavian experience is discussed here:
New Business Opportunity: SMS Loan Sharking
http://www.port...s-loan-sharking
It is turned out to be a major social problem resulting in chronically indebted people, ruined credit histories and lives.