By Mark Fairlie.
Describing Wonga as the “least worst” of the high-cost credit companies, Mr Blomfield said that
“if you’ve got a doorstep lender…with a baseball bat, Wonga looks like a pretty attractive alternative”.
Although Monzo is not currently developing the service for future launch, Mr Blomfield shared that there had been board-level conversations about entering the high cost, short-term credit market.
In a corporate version of six degrees of separation, one of Monzo’s original backers in an early round of funding was Accel Partners, also an early stage investor in Wonga.
Monzo is an online-only bank offering an interest-bearing current account and prepaid debit card which customers can operate via their mobile phones. They also offer an international money transfer service via partner TransferWise. They currently do not offer any type of loan service to customers.
According to City AM, the company currently employs more than 500 staff in the UK and the US with over 1 million current account customers. It has just launched the largest fintech funding appeal in the UK as it seeks £20m of new capital from investors.
Its current £1.5bn market capitalisation makes Monzo one of the UK’s first “unicorns”, the term used to describe privately-held start-up companies with valuations in excess of $1bn.
In August 2018, one of the UK’s most famous (and infamous) fintech companies, Wonga, went into administration. Wonga was the market leader in the high cost, short-term credit market specialising in offering payday loans and short-term loans to consumers with poor credit ratings.
Encouraged by claims lawyers, Wonga’s current and past borrowers made complaints against the company over its decisions to lend money and the way it behaved towards borrowers who had fallen behind on their repayments. Wonga’s collapse was caused because it ran out of operating cash as it had to pay the Ombudsman £515 to deal with nearly every complaint that reached it, regardless of whether the company would then have to pay actual compensation to individual customers.
The companies handling Wonga’s administration are “set to enjoy a £4.1m bonanza from the collapsed payday lender while thousands of claimants lose out”, according to the Daily Mail.
Grant Thornton, the accounting firm in charge of winding up the company, has decided to automate the process of adjudication on whether claimants are due compensation, according to the Guardian. In total, the administrators are now dealing with 24,000 complaints, 9,500 of which have now been presented to the Financial Ombudsman.
In a recent editorial in the Times, columnist Oliver Shah believes that Wonga
“was a good idea in its purest form (which) went awry as it came into contact with reality”.
Its early promise was in how they served “the vast number of people on the edge of the financial system…Imagine a digital bank that could speak to these squeezed householders in a creative way without plumbing the moral depths touched by Wonga”.