Yesterday’s news that Wonga, Britains biggest payday lender, slumped into the red by £37m, came, to a certain extent, as no surprise. The scandal-ladened lender has lurched from regulatory fine to regulatory clampdown over the last year providing Andy Haste, the Chairman, with probably the biggest challenge of his career.
Mr Haste is an interesting chap. He has achieved a strong financial services reputation. His previous role as CEO of RSA, the insurer, perhaps gave him the most appropriate experience for his chairmanship at Wonga. He was parachuted into the RSA following a shareholder revolt after they said they would not support another rights issue. He was there from 2003 to 2011 so the guy likes to see a job through.
The question is can Mr Haste turn around Wonga? Could he even make it a force for good? Helping the millions in the UK and the world that are now closed off from mainstream credit providers.
Following the results announcement there have been a few pieces in the media about what they need to do to change. At Money Saving Movement we have some ideas about how this company can turned into a force for good. We hope Mr Haste takes a look:
- Re-Direct the strategy and aims of the business
There is, without a shadow of doubt, a very large market for a business like Wonga. The company’s success during the boom years, in terms of revenue and profit, is testament to that. Where it could be suggested that they went wrong is that the guys in charge, at the time, lost sight of how important their customer was. Never lose sight of how important your customer is, rule number one, right! Well, Wonga did. Back in Wonga’s hay day, it is well documented that there was an arrogance amongst the management who were unashamed of their exploitative business model. Well this rather short term approach is why the business is now £37m in the red.
What is now required is an approach distinctly different to the one previously adopted. Strategically they need to embrace the hand that feeds them. They need to care about those in poverty as well as low income groups and adopt a corporate responsibility charter way over and above that dictated by the Financial Conduct Authority. Wonga could be Become a for-profit social enterprise. They could direct a proportion of profits to helping those most in need and provide education to prevent financial hardship. This polar opposite approach would be welcomed by the market that they serve and help them to become a force for good.
2) Raise affordability
Wonga’s current representative APR is an eye watering 1509%APR. Now we know that APRs can be slightly misleading in the short term lending game but even so Mr Haste, 1509%. Raising the affordability for customers by reducing the cost of credit would open up the market. This would bring them Inline with options that are currently being provided by progressive credit unions like London Mutual. There is no need to have the interest rates so high.
What Wonga stood for was bad. It was exploitative and caused pain for many. To end the association with this a full rebranding exercise is required. Change of name, change of advertising (we are pleased you stopped the puppets Andy) and a change in the tone of voice. Here are our best name ideas for you –
Conga (People love dancing in a line)
Change (Coins in your pocket and a double meaning about a new start)
Lending Hand (helping and supporting people)
Admittedly this took us two minutes over tea and cake but hopefully you get the idea.
Wonga is toxic and it now needs dramatic change. For once we hope that change is not just about trying to make more money but also about helping the people that need their service. The two can be achieved together.